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A Decentralized Market with Common Values Uncertainty: Non-Steady States

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Listed:
  • Max R. Blouin
  • Roberto Serrano

Abstract

We analyse a market where (i) trade proceeds by random and anonymous pairwise meetings with bargaining; (ii) agents are asymmetrically informed about the value of the traded good; and (iii) no new entrants are allowed once the market is open. We show that information revelation and efficiency never obtain in equilibrium, even as discounting is removed. This holds whether the asymmetry is two-sided or one-sided. In some cases there exist equilibria where a substantial amount goes untraded. This contrasts with the earlier literature, which was based on the steadystate equilibria of a model where agents enter the market every period.

Suggested Citation

  • Max R. Blouin & Roberto Serrano, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 323-346.
  • Handle: RePEc:oup:restud:v:68:y:2001:i:2:p:323-346.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00171
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    References listed on IDEAS

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    1. Milgrom, Paul R, 1981. "Rational Expectations, Information Acquisition, and Competitive Bidding," Econometrica, Econometric Society, vol. 49(4), pages 921-943, June.
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    6. 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.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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