Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition
Consider a decentralized, dynamic market with an infinite horizon and participation costs in which both buyers and sellers have private information concerning their values for the indivisible traded good. Time is discrete, each period has length δ, and, each unit of time, continuums of new buyers and sellers consider entry. Traders whose expected utility is negative choose not to enter. Within a period each buyer is matched anonymously with a seller and each seller is matched with zero, one, or more buyers. Every seller runs a first price auction with a reservation price and, if trade occurs, both the seller and the winning buyer exit the market with their realized utility. Traders who fail to trade continue in the market to be rematched. We characterize the steady-state equilibria that are perfect Bayesian. We show that, as δ converges to zero, equilibrium prices at which trades occur converge to the Walrasian price and the realized allocations converge to the competitive allocation. We also show the existence of equilibria for δ sufficiently small, provided the discount rate is small relative to the participation costs. Copyright The Econometric Society 2007.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 75 (2007)
Issue (Month): 1 (01)
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/
More information through EDIRC
|Order Information:|| Web: https://www.econometricsociety.org/publications/econometrica/access/ordering-back-issues Email: |
References listed on IDEAS
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.:
- Arial Rubinstein & Asher Wolinsky, 1985.
"Equilibrium in a Market with Sequential Bargaining,"
Levine's Working Paper Archive
623, David K. Levine.
- Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
- Mark Satterthwaite & Artyom Shneyerov, 2003.
"Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition,"
1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Satterthwaite, Mark & Shneyerov, Artyom, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Microeconomics.ca working papers shneyerov-03-12-17-09-36-, Vancouver School of Economics, revised 17 Dec 2003.
- Asher Wolinsky, 1988. "Dynamic Markets with Competitive Bidding," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 71-84.
- Mark A. Satterthwaite & Steven R. Williams, 2002. "The Optimality of a Simple Market Mechanism," Econometrica, Econometric Society, vol. 70(5), pages 1841-1863, September.
- Arial Rubinstein & Asher Wolinsky, 1990.
"Decentralized Trading, Strategic Behaviour and the Walrasian Outcome,"
Levine's Working Paper Archive
622, David K. Levine.
- Ariel Rubinstein & Asher Wolinsky, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 63-78.
- Gianni De Fraja & Jozsef Sakovics, 1999.
"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.
- John Rust & George Hall, 2003.
"Middlemen versus Market Makers: A Theory of Competitive Exchange,"
Journal of Political Economy,
University of Chicago Press, vol. 111(2), pages 353-403, April.
- John Rust & George Hall, 2001. "Middle Men Versus Market Makers: A Theory of Competitive Exchange," Cowles Foundation Discussion Papers 1299, Cowles Foundation for Research in Economics, Yale University.
- John Rust & George Hall, 2002. "Middlemen versus Market Makers: A Theory of Competitive Exchange," NBER Working Papers 8883, National Bureau of Economic Research, Inc.
- Serrano, R. & Yosha, O., 1995.
"Decentralized Information and the Walrasian Outcome : A Pairwise Meetings Market with Private Values,"
26-95, Tel Aviv.
- Serrano, Roberto, 2002. "Decentralized information and the Walrasian outcome: a pairwise meetings market with private values," Journal of Mathematical Economics, Elsevier, vol. 38(1-2), pages 65-89, September.
- Roberto Serrano, 2000. "Decentralized Information and the Walrasian Outcome:A Pairwise Meetings Market with Private Values," Working Papers 2000-13, Brown University, Department of Economics.
- Milgrom,Paul, 2004.
"Putting Auction Theory to Work,"
Cambridge University Press, number 9780521551847, October.
- Gale, Douglas, 1987.
"Limit theorems for markets with sequential bargaining,"
Journal of Economic Theory,
Elsevier, vol. 43(1), pages 20-54, October.
- Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
- Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March.
- Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:75:y:2007:i:1:p:155-200. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.