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Posted Prices, Search and Bargaining

Author

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  • Derek Stacey

    (Ryerson University)

Abstract

A model of a decentralized market is developed that features search frictions, advertised prices and bargaining. Sellers can post ask prices to attract buyers through a process of directed search, but ex post there is the possibility of negotiation. Similarly, buyers can advertise negotiable bid prices to attract sellers. Even when transaction prices often differ from quoted prices, bid and ask prices play a crucial role in directing search and reducing trading frictions. The theory endogenizes the direction of search and provides insight about the prevalence of posted prices in the absence of full commitment by market participants to transact at the advertised price. (Copyright: Elsevier)

Suggested Citation

  • Derek Stacey, 2019. "Posted Prices, Search and Bargaining," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 85-104, July.
  • Handle: RePEc:red:issued:18-281
    DOI: 10.1016/j.red.2019.04.008
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Stefano Banfi & Benjamín Villena-Roldán, 2019. "Do High-Wage Jobs Attract More Applicants? Directed Search Evidence from the Online Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 715-746.
    2. repec:red:issued:19-0 is not listed on IDEAS
    3. Ian King & Frank Stähler, 2018. "Capital Utilization and Search Unemployment in Dynamic General Equilibrium," Discussion Papers Series 598, School of Economics, University of Queensland, Australia.

    More about this item

    Keywords

    Bid and ask prices; Search frictions; Price commitment;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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