Dynamic Matching,Two-sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition

Mark Satterthwaite and Artyom Shneyerov ()

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: Consider a decentralized, dynamic market with an infinite horizon and participation costs in which both buyers and sellers have private information concerning their values for the indivisible traded good. Time is discrete, each period has length δ, and each unit of time continuums of new buyers and sellers consider entry. Traders whose expected utility is negative choose not to enter. Within a period each buyer is matched anonymously with a seller and each seller is matched with zero, one, or more buyers. Every seller runs a first price auction with a reservation price and, if trade occurs, both the seller and winning buyer exit the market with their realized utility. Traders who fail to trade continue in the market to be rematched. We characterize the steady-state equilibria that satisfy a subgame perfection criterion. We show that, as δ converges to zero, equilibrium prices at which trades occur converge to the Walrasian price and the realized allocations converge to the competitive allocation. We also show existence of equilibria for δ sufficiently small.

Pages: 0 pages
Date: 2004-12-17, Revised 2004-12-17
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Related works:
Journal Article: Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:shneyerov-04-12-17-02-54-18

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