Dynamic Markets with Competitive Bidding

The model features a dynamic market in steady state in which prices are determined in first-price auctions. It combines competition over time familiar from the pairwise meeting models with instantaneous bidding competition. It inquires how different properties of the model determine the relative importance of these two aspects of the competition and, in particular, how the non-market-clearing price result of the matching and bargaining models is affected by the introduction of instantaneous bidding competition. It turns out, for example, that if there is some heterogeneity in buyers' valuations of the traded goods, then when the market is frictionless enough in the sense that the common discount factor is close to 1, the instantaneous bidding competition effectively disappears and the non-market-clearing price result can obtain.