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Buyer's Equilibrium with Capacity Constraints and Restricted Mobility: a Recursive Approach

Author

Listed:
  • Gabriele Camera

    () (Economic Science Institute, Chapman University and University of Basel)

  • Jaehong Kim

    (Purdue University and University of Basel)

Abstract

We study a decentralized trading model as in Peters (1984), where heterogeneous market participants face a trade-o between price and trade probability. We present a novel proof of existence of a unique demand vector in Nash equilibrium, based on a recursive approach that exploits the monotonicity of matching functions.

Suggested Citation

  • Gabriele Camera & Jaehong Kim, 2012. "Buyer's Equilibrium with Capacity Constraints and Restricted Mobility: a Recursive Approach," Working Papers 12-28, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:12-28
    as

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    File URL: http://www.chapman.edu/research-and-institutions/economic-science-institute/_files/WorkingPapers/camera-buyer-equilibrium-with-capacity-constraints.pdf
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    References listed on IDEAS

    as
    1. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    2. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 869-891.
    3. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    4. Selcuk, Cemil, 2012. "Trading mechanism selection with directed search when buyers are risk averse," Economics Letters, Elsevier, vol. 115(2), pages 207-210.
    5. Gabriele Camera & Cemil Selcuk, 2009. "Price Dispersion with Directed Search," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1193-1224, December.
    6. Peters, Michael, 1984. "Restrictions on Price Advertising," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 472-485, June.
    7. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 163-179.
    8. Virág, Gábor, 2011. "High profit equilibria in directed search models," Games and Economic Behavior, Elsevier, vol. 71(1), pages 224-234, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gabriele Camera & Jaehong Kim, 2016. "Dynamic directed search," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 131-154, June.
    2. Kim, Jaehong & Camera, Gabriele, 2014. "Uniqueness of equilibrium in directed search models," Journal of Economic Theory, Elsevier, vol. 151(C), pages 248-267.

    More about this item

    Keywords

    Nash equilibrium; recursive methods; existence; heterogeneity; matching;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D39 - Microeconomics - - Distribution - - - Other
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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