Substitute goods, auctions, and equilibrium

Paul Milgrom, Bruno Strulovici*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

31 Scopus citations


This paper identifies two notions of substitutes for auction and equilibrium analysis. Weak substitutes, the usual price-theory notion, guarantees monotonicity of tâtonnement processes and convergence of clock auctions to a pseudo-equilibrium, but only strong substitutes, which treats each unit traded as a distinct good with its own price, guarantees that every pseudo-equilibrium is a Walrasian equilibrium, that the Vickrey outcome is in the core, and that the "law of aggregate demand" is satisfied. When goods are divisible, weak substitutes along with concavity guarantees all of the above properties, except for the law of aggregate demand.

Original languageEnglish (US)
Pages (from-to)212-247
Number of pages36
JournalJournal of Economic Theory
Issue number1
StatePublished - Jan 2009


  • Gross substitutes
  • Law of aggregate demand
  • Pseudo-equilibrium
  • Tâtonnement

ASJC Scopus subject areas

  • Economics and Econometrics


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