The two essential features of a decentralized economy taken into
account are, first, that individual agents need some information
about other agents in order to meet potential trading partners,
which requires some communication or interaction between these
agents, and second, that in general agents will face trading
uncertainty. We consider trade in a homogeneous commodity. Firms
decide upon their effective supplies, and may create their own
markets by sending information signals communicating their
willingness ...
The two essential features of a decentralized economy taken into
account are, first, that individual agents need some information
about other agents in order to meet potential trading partners,
which requires some communication or interaction between these
agents, and second, that in general agents will face trading
uncertainty. We consider trade in a homogeneous commodity. Firms
decide upon their effective supplies, and may create their own
markets by sending information signals communicating their
willingness to sell. Meeting of potential trading partners is
arranged in the form of shopping by consumers. The questions to be
considered are: How do firms compete in such markets? And what are
the properties of an equilibrium? We establish existence
conditions for a symmetric Nash equilibrium in the firms'
strategies, and analyze its characteristics. The developed
framework appears to lend itself well to study many typical
phenomena of decentralized economies, such as the emergence of
central markets, the role of middlemen, and price-making.
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