Abstract
We discuss how linear equilibrium pricing in certain competitive market structures may represent nonlinear equilibrium pricing of Aliprantis et al. (J Econ Theory 100:22–72, 2001, J Econ Theory 121:51–74, 2005). Their work extends the theory of value beyond the scope of the Walrasian single market linear price model. Our arguments include a new and general result on the existence of linear price equilibrium with multiple markets. Each market has its own price vector (linear functional), and agents’ involvement in various markets is heterogeneous. As a result, price differences across markets may prevail in equilibrium. We present an example in which single market linear price equilibrium does not exist, but certain corresponding equilibrium with two markets does. This example is a particular instance of a prevalent nonexistence problem in atomless economies with differential information. Bypassing the nonexistence problem is one of the achievements of the nonlinear equilibrium theory. Our equilibrium with multiple markets, on the other hand, offers a solution with a more standard economic interpretation. Besides, our general framework is a model of multiple markets in their own right, and our results are related to the role of economic intermediation and bilateral trade.
Published Version
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