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Bargaining and delay in Thin Markets

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  • Francesc Dilmé

Abstract

This paper presents a model of a decentralized thin market with endogenous and stochastic arrival of traders. We obtain that trade delay and price dispersion persist even when sellers and buyers are homogeneous and bargaining frictions are small. We characterize the time-dependent transaction prices as a function of the dynamics of the number of traders in the market, and provide some comparative statics results. Our analysis illustrates the necessity to properly incorporating the submarket structure into the study of job and housing markets, where the trade opportunities are typically constrained both by each trader’s geographical location and individual characteristics.

Suggested Citation

  • Francesc Dilmé, 2019. "Bargaining and delay in Thin Markets," CRC TR 224 Discussion Paper Series crctr224_2019_133, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_133
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp133
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    More about this item

    Keywords

    Thin 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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