Comparative statics in a simple class of strategic market games

This paper investigates the effects of entry in two-sided markets where buyers and sellers act strategically. Applying new tools from supermodular optimization/games, Sufficient conditions for different comparative statics results are obtained. While normality of one good is Sufficient for the equilibrium price to be increasing in the number of buyers, normality of both goods is required for equilibrium bids and sellers' equilibrium utilities to be increasing in the number of buyers. When the economy is replicated, normality of both goods and gross substitutes guarantee that the equilibrium of the strategic market game converges monotonically (in quantities) to the competitive equilibrium. Simple counter-examples are provided to settle other potential conjectures of interest. (C) 2007 Elsevier Inc. All rights reserved.