Decentralized Trade in a Small Market: The Possibility of Resale

Ebbe Hendon and Torben Tranaes ()
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Ebbe Hendon: Institute of Economics, University of Copenhagen

No 95-06, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: A matching and bargaining model in a market for a single good with one seller and two different buyers is analyzed under the assumption that resale is possible (buying the good does not necessarily mean consuming it). It is known that the model without resale has inefficient equilibria in which the low buyer receives the good with high probability, even as friction becomes negligible. We show that in case the good is a non-durable (i.e., it yields no interests) resale opportunities do not ensure efficiency. Whereas in case the good is durable the resale model has a unique and efficient equilibrium.

Keywords: resale; competitive equilibrium; bargaining and markets (search for similar items in EconPapers)
Pages: 43 pages
Date: 1995-06
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9506

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