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Holdup, Search and Inefficiency

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  • Shingo Ishiguro

    ()
    (Graduate School of Economics, Osaka University)

Abstract

This paper investigates the holdup problem in the dynamic search market where buyers and sellers search for their trading partners and specific investments are made after match but before trade. We show that frictionless (competitive) market imposes severe limitations on attainable efficiencies: Markets with small friction make the holdup problem more serious than those with large friction because in any equilibrium, whether stationary or non-stationary, investment must be dropped down to the minimum level and trade must be delayed with positive probability.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0713.pdf
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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-13.

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Length: 46 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:osk:wpaper:0713

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Delay of Trade; Holdup Problem; Search;

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