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Endogenous transactions costs in multi-seller model

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  • Menezes, Flavio Marques
  • Pitchford, Rohan

Abstract

vVe examine the problem of a buyer who wishes to purehase and eombine ti. objeets owned by n individual owners to realize a higher V'illue. The owners are able to delay their entry into the sale proeess: They ean either seU now 01' seU later. Among other assumptions, the simple assumptions of compef'if'irnl, · .. that the presenee of more owners at point of sale reduees their surplus .. · and di..,(Jyun,fúl,g lead to interesting results: There is eostly delay in equilibdum. rvIoreover, with suffidently strong eompetition, the probability of delay inereases with n. Thus, buyers who diseount the future \\i11 faee inereased eosts as the number of owners inereases. The souree of transaetions eosts is the owners' desire to dis-eoordinate in the presenee of eompetition. These eosts are unrelated to transaetions eosts eurrently identified in the literature, spedfieally those due to asymmetrie information, 01' publie goods problems where players impose negative externalities on eaeh other by under-eontributing.

Suggested Citation

  • Menezes, Flavio Marques & Pitchford, Rohan, 2001. "Endogenous transactions costs in multi-seller model," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 430, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:430
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    Cited by:

    1. Sean M. Collins & R. Mark Isaac, 2012. "Holdout: Existence, Information, and Contingent Contracting," Journal of Law and Economics, University of Chicago Press, vol. 55(4), pages 793-814.

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