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Buyer's Equilibrium with Capacity Constraints and Restricted Mobility: a Recursive Approach

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  • Gabriele Camera

    ()
    (Economic Science Institute, Chapman University and University of Basel)

  • Jaehong Kim

    (Purdue University and University of Basel)

Abstract

We study a decentralized trading model as in Peters (1984), where heterogeneous market participants face a trade-o between price and trade probability. We present a novel proof of existence of a unique demand vector in Nash equilibrium, based on a recursive approach that exploits the monotonicity of matching functions.

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Bibliographic Info

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 12-28.

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Length: 19 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:chu:wpaper:12-28

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Keywords: Nash equilibrium; recursive methods; existence; heterogeneity; matching;

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  1. Selcuk, Cemil, 2012. "Trading mechanism selection with directed search when buyers are risk averse," Economics Letters, Elsevier, vol. 115(2), pages 207-210.
  2. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Equilibrium Directed Search with Multiple Application," Working Papers gueconwpa~03-03-02, Georgetown University, Department of Economics.
  3. Peters, Michael, 1984. "Restrictions on Price Advertising," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 472-85, June.
  4. Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
  5. Camera, Gabriele & Selcuk, Cemil, 2004. "Price Dispersion with Directed Search," Purdue University Economics Working Papers 1173, Purdue University, Department of Economics.
  6. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
  7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  8. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-27, September.
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