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A Decentralized Market for a Perishable Good

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  • Anwar Ahmed W

    ()
    (University of Edinburgh)

  • Sákovics József

    ()
    (University of Edinburgh)

Abstract

We characterize the steady state of a market with random matching and bargaining, where the sellers' goods can perish overnight. Generically, the quantity traded is suboptimal, prices are dispersed and there is a dead-weight loss caused by excess supply or demand. In the limit as the cost of staying in the market tends to zero, only the amount of trade tends to the efficient level, the other two non-competitive characteristics remain. We discuss the implications of these findings on the foundations of competitive equilibrium and on the robustness of the results in the literature on durable-good markets.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 7 (2007)
Issue (Month): 1 (February)
Pages: 1-25

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Handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:7

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  1. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  2. Clara Ponsati & József Sákovics, 2005. "Markets for professional services: queues and mediocrity," ESE Discussion Papers 133, Edinburgh School of Economics, University of Edinburgh.
  3. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
  4. Dale T. Mortensen & Randall Wright, 2002. "Competitive Pricing and Efficiency in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 1-20, February.
  5. Gale, Douglas & Sabourian, Hamid, 2006. "Markov equilibria in dynamic matching and bargaining games," Games and Economic Behavior, Elsevier, vol. 54(2), pages 336-352, February.
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Cited by:
  1. Ponsatí­, Clara & Sákovics, József, 2008. "Queues, not just mediocrity: Inefficiency in decentralized markets with vertical differentiation," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 998-1014, July.

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