How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market

Dipjyoti Majumdar, Artyom Shneyerov (artyom239@gmail.com) and Huan Xie

No 10004, Working Papers from Concordia University, Department of Economics

Abstract: We study a market search equilibrium with aggregate uncertainty, private information and heterogeneus beiefs. Traders initially start out optimistic and then update their beliefs based on their matching experience in the market, using the Bayes rule. It is shown that all separating equilibria converge to perfect competition in the limit as the time between matches tends to 0. We also establish existence of a separating equilibrium.

Keywords: Markets with search frictions; aggregate uncertainty; heterogeneous beliefs; optimism; bargaining; foundations of Walrasian equilibrium (search for similar items in EconPapers)
JEL-codes: C73 C78 D83 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2010-10-22
New Economics Papers: this item is included in nep-cta, nep-dge and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sites.google.com/site/artyom239/Opt_MSX.pdf (application/pdf)

Related works:
Working Paper: How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crd:wpaper:10004

Access Statistics for this paper

More papers in Working Papers from Concordia University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Economics Department (paul.gomme@concordia.ca).