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Prices, delay and the dynamics of trade

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  • Moreno, Diego
  • Wooders, John

Abstract

We characterize trading patterns and their dynamics in a market in which trade is bilateral, finding a trading partner is costly, prices are determined by bargaining, and preferences are private information. We also determine how the trading pattern depends on the market composition. Our analysis reveals that market equilibria may be inefficient and may exhibit delay. As the market becomes frictionless the welfare loss due to inefficiency vanishes; delay persists, however, and in this respect frictionless markets are not competitive.

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Bibliographic Info

Paper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/7217.

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Handle: RePEc:ner:carlos:info:hdl:10016/7217

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Web page: http://www.uc3m.es

Related research

Keywords: Trade dynamics; Matching; Bargaining; Delay; Asymmetric information; Decentralized trade;

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  1. Serrano, R. & Yosha, O., 1995. "Decentralized Information and the Walrasian Outcome : A Pairwise Meetings Market with Private Values," Papers 26-95, Tel Aviv.
  2. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  3. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
  4. Samuelson, Larry, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 177-85, January.
  5. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  6. Binmore, Ken G & Herrero, M J, 1988. "Matching and Bargaining in Dynamic Markets," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 17-31, January.
  7. Hart, Oliver D & Tirole, Jean, 1988. "Contract Renegotiation and Coasian Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 509-40, October.
  8. Serrano, Roberto & Yosha, Oved, 1996. "Welfare Analysis of a Market with Pairwise Meetings and Asymmetric Information," Economic Theory, Springer, vol. 8(1), pages 167-75, June.
  9. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
  10. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May.
  11. Wolinsky, Asher, 1987. "Information Revelation in a Market with Pairwise Meetings," The Warwick Economics Research Paper Series (TWERPS) 284, University of Warwick, Department of Economics.
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