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Advertised Prices in Decentralized Markets

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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 renegotiation. Similarly, buyers can advertise negotiable bid prices to attract sellers. Even though transaction prices often differ from quoted prices, advertised bid and ask prices play a crucial role in directing search and reducing trading frictions. The features and predictions of the model align well with aspects of the secondary market for transferable taxicab license plates in Toronto. This provides a useful and unique context for studying the relationships between advertised and actual prices in a decentralized market.

Suggested Citation

  • Derek Stacey, 2015. "Advertised Prices in Decentralized Markets," 2015 Meeting Papers 1011, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1011
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    References listed on IDEAS

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    6. 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.
    Full references (including those not matched with items on IDEAS)

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