Equilibria of a two-stage market with chance outcome in the spot market |
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Authors: | A A Vasin A A Sharikova |
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Institution: | 1.Department of Computational Mathematics and Cybernetics,Moscow State University,Moscow,Russia |
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Abstract: | We address the problem of how to improve the efficiency of markets of similar goods (electric power, gas, and other resources).
One way to undermine the market dominance of some companies is the possibility of forward contracts. Here a model of the spot
and forward markets functioning as Curnout auctions is studied using the example of symmetrical oligopoly. Suppliers try to
maximize their profit by this two-stage game’s strategies of traded subgame equilibrium (TSE). The conditions for equilibrium
achieved by correlated mixed strategies are elucidated: either a “bull” or “bear” market is established according to a chance
factor. The optimum strategies of rational bidders are found to depend on the reserve price and a risk-avoiding parameter.
TSE is compared to the Nash equilibria for one-stage models. |
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Keywords: | |
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