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Option to wait in a search model

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Author Info

  • Klaus Kultti

    ()

  • Juha Virrankoski

    ()

Abstract

We consider a standard search model with buyers and sellers. Upon meeting the buyers make a take-it-or-leave-it offer, but the sellers have an option not to trade immediately but wait for more agents to appear. If more buyers come, there is excess demand, and the buyers engage in auction to get the good. Analogously, if more sellers come, the sellers engage in a Bertrand-type pricing game to sell the object. The option to wait restricts the price offer of the buyer; in an equilibrium in which trades are consummated without delay there is a unique price offer for the buyer. Copyright Springer-Verlag Berlin/Heidelberg 2004

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File URL: http://hdl.handle.net/10.1007/s10108-003-0073-z
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Bibliographic Info

Article provided by Springer in its journal Spanish Economic Review.

Volume (Year): 6 (2004)
Issue (Month): 2 (07)
Pages: 153-158

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Handle: RePEc:spr:specre:v:6:y:2004:i:2:p:153-158

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Related research

Keywords: Option to wait; bargaining; auction; search;

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Cited by:
  1. Vesala , Timo, 2004. "Asymmetric information in credit markets and entrepreneurial risk taking," Research Discussion Papers 14/2004, Bank of Finland.

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