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Prices, Delay, and the Dynamics of Trade

  • Moreno, Diego
  • Wooders, John

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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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 104 (2002)
Issue (Month): 2 (June)
Pages: 304-339

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Handle: RePEc:eee:jetheo:v:104:y:2002:i:2:p:304-339
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  1. Moreno, Diego & Wooders, John, 2002. "Prices, Delay, and the Dynamics of Trade," Journal of Economic Theory, Elsevier, vol. 104(2), pages 304-339, June.
  2. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
  3. Oved Yosha & Roberto Serrano, 1996. "Welfare analysis of a market with pairwise meetings and asymmetric information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 167-175.
  4. K. G. Binmore & M. J. Herrero, 1988. "Matching and Bargaining in Dynamic Markets," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 17-31.
  5. 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.
  6. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
  7. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  8. Wolinsky, Asher, 1990. "Information Revelation in a Market with Pairwise Meetings," Econometrica, Econometric Society, vol. 58(1), pages 1-23, January.
  9. Oliver D. Hart & Jean Tirole, 1987. "Contract Renegotiation and Coasian Dynamics," Working papers 442, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Matthew O. Jackson & Thomas R. Palfrey, 1997. "Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining," Game Theory and Information 9711003, EconWPA.
  11. Larry Samuelson, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 177-185.
  12. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
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