Equilibria in Matching Markets with Soft and Hard Liquidity Constraints

P. Jean-Jacques Herings and Yu Zhou

No 13, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: We consider a matching with contracts model in the presence of liquidity constraints on the buyers side. Liquidity constraints can be either soft or hard. A convergent sequence of economies with increasingly stringent soft liquidity constraints is an economy with hard liquidity constraints at the limit. The limit of a corresponding convergent sequence of competitive equilibria may fail to be a competitive equilibrium in the limit economy. We establish limit results of two alternative notions of competitive equilibrium, quantity-constrained competitive equilibrium and expectational equilibrium, which do not suffer from such discontinuity problems. The implications of these limit results are discussed.

JEL-codes: C72 C78 D45 D52 (search for similar items in EconPapers)
Date: 2021-09-20
New Economics Papers: this item is included in nep-cta, nep-des, nep-isf and nep-mic
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Journal Article: Equilibria in matching markets with soft and hard liquidity constraints (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2021013

DOI: 10.26481/umagsb.2021013

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