Few traders can drive competitive behavior in markets, study finds.
The article explores how competition works in markets with few buyers and sellers. By using a game model, the researchers found that for competitive outcomes to happen, there must be at least two buyers and two sellers willing to trade at each competitive price. This condition was tested in experiments and was shown to lead to competitive results, with market outcomes closely resembling Nash equilibrium predictions. This suggests that even with limited information, people can make decisions in markets as if they had complete information.