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Bargaining in Small Dynamic Markets

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  • Francesc Dilmé

    (University of Bonn)

Abstract

This paper studies trade in endogenously evolving markets exhibiting few traders at any given point in time. Traders arrive in the market and bargain until they complete a trade. We find that, unlike large markets, small markets feature trade delay and price dispersion, even when sellers and buyers are homogeneous and matching frictions are small. We characterize transaction prices as a function of the endogenous evolution of the market composition and economic conditions, providing several novel comparative statics results. Our analysis highlights the need to incorporate sub-market structures into the theoretical study of job, real estate, and rental markets, where trade opportunities are typically constrained by both the geographical location and individual characteristics of each trader.

Suggested Citation

  • Francesc Dilmé, 2022. "Bargaining in Small Dynamic Markets," ECONtribute Discussion Papers Series 193, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:193
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    References listed on IDEAS

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    More about this item

    Keywords

    Small dynamic markets; decentralized bargaining; trade delay.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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