Francesc Dilmé, University of Bonn

"Bargaining and Delay in Thin Markets" Job Market Seminar

Abstract:
Many markets are thin: they have few traders at any given moment in time. For example, traders in job and housing markets are typically constrained, both by their geographical location and their individual characteristics. In these markets, entry and exit make trading opportunities stochastically change over time, affecting the bargaining position of traders. This paper presents a model of a thin market with endogenous arrival of traders and characterizes the timing and prices of the transactions. Trade delay and price dispersion are found to persist even when buyers and sellers are homogeneous and bargaining frictions are small. Our results underscore that properly incorporating the submarket structure into the study of decentralized markets is necessary in order to correctly assess some properties of their outcomes.

 

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