How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market
AbstractAbstract We study a market search equilibrium with aggregate uncertainty, private information and heterogeneus beiefs. Traders initially start out optimistic and then update their beliefs based on their matching experience in the market, using the Bayes rule. It is shown that all separating equilibria converge to perfect competition in the limit as the time between matches tends to 0. We also establish existence of a separating equilibrium.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Microeconomics.ca Website in its series Micro Theory Working Papers with number artyom_shneyerov-2010-32.
Length: 41 pages
Date of creation: 23 Oct 2010
Date of revision: 26 Oct 2010
Contact details of provider:
Markets with search frictions; aggregate uncertainty; heterogeneous beliefs; optimism; bargaining; foundations of Walrasian equilibrium;
Other versions of this item:
- Dipjyoti Majumdar & Artyom Shneyerov & Huan Xie, 2010. "How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market," Working Papers 10004, Concordia University, Department of Economics.
- 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
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-06 (All new papers)
- NEP-CTA-2010-11-06 (Contract Theory & Applications)
- NEP-DGE-2010-11-06 (Dynamic General Equilibrium)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gianni De Fraja & Jozsef Sakovics, 2004.
"Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price,"
ESE Discussion Papers
36, Edinburgh School of Economics, University of Edinburgh.
- Gianni De Fraja & Jozsef Sakovics, 2001. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," Journal of Political Economy, University of Chicago Press, vol. 109(4), pages 842-863, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael Peters).
If references are entirely missing, you can add them using this form.