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The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets

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  • Curtis R. Taylor

Abstract

The determinants of bargaining power and price formation in a dynamic exchange market where new traders enter randomly over time are studied. When agents on the long side of the market possess the option to wait for the arrival of future partners, the terms of trade in the spot market must honor the value of this option. The equilibrium terms of trade are expressed in intuitive closed-form equations that highlight the distinct influences of short-run spot-market conditions and long-run market demographics.

Suggested Citation

  • Curtis R. Taylor, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 837-855.
  • Handle: RePEc:oup:qjecon:v:110:y:1995:i:3:p:837-855.
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    File URL: http://hdl.handle.net/10.2307/2946701
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    Cited by:

    1. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, vol. 99(5), pages 1878-1898, December.
    2. William Hawkins, 2013. "Worker Flows under Mismatch," 2013 Meeting Papers 479, Society for Economic Dynamics.
    3. Eric Smith, 2015. "High and Low Activity Spells in Housing Markets," CESifo Working Paper Series 5601, CESifo Group Munich.
    4. Bester, Helmut, 2013. "Investments and the holdup problem in a matching market," Journal of Mathematical Economics, Elsevier, vol. 49(4), pages 302-311.
    5. William Hawkins & Carlos Carrillo-Tudela, 2014. "A Generalized Model of Stock-Flow Matching," 2014 Meeting Papers 1380, Society for Economic Dynamics.
    6. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
    7. 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.
    8. Eric Smith & Carlos Carrillo Tudela, 2007. "Wage Dispersion and Wage Dynamics Within and Across Firms," 2007 Meeting Papers 615, Society for Economic Dynamics.
    9. Ewa Gałecka-Burdziak, 2012. "Labour market matching – the case of Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 43(3), pages 31-46.
    10. Carlos Carrillo-Tudela & Eric Smith, 2017. "Search Capital," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 23, pages 191-211, January.
    11. Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 261-282, October.
    12. Robert Shimer, 2007. "Mismatch," American Economic Review, American Economic Association, vol. 97(4), pages 1074-1101, September.
    13. Melvyn Coles & Barbara Petrongolo, 2005. "A test between matching theories," Working Papers 175, Barcelona Graduate School of Economics.
    14. Eric Smith, 2010. "High and Low Activity Spells in Housing and Labor Markets," 2010 Meeting Papers 943, Society for Economic Dynamics.
    15. Carlos Carrillo‐Tudela & Guido Menzio & Eric Smith, 2011. "Job Search With Bidder Memories," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 639-655, August.
    16. Ebrahimy, Ehsan & Shimer, Robert, 2010. "Stock-flow matching," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1325-1353, July.
    17. repec:esx:essedp:775 is not listed on IDEAS
    18. Harashima, Taiji, 2011. "A Mechanism of Cyclical Volatility in the Vacancy-Unemployment Ratio: What Is the Source of Rigidity?," MPRA Paper 32476, University Library of Munich, Germany.
    19. Kuo, Mien-Yun & Smith, Eric, 2009. "Marketplace matching in Britain: Evidence from individual unemployment spells," Labour Economics, Elsevier, vol. 16(1), pages 37-46, January.
    20. Said, Maher, 2011. "Sequential auctions with randomly arriving buyers," Games and Economic Behavior, Elsevier, vol. 73(1), pages 236-243, September.

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