A Dynamic Price-Setting Mechanism for a Hybrid Matching Market

Marilda Sotomayor ()

Brazilian Review of Econometrics, 2003, vol. 23, issue 2

Abstract: After observing the problem of the intimate wear market of Nova Friburgo with the distribution of its product both in Brazil and abroad, we designed a dynamic allocation mechanism that sets the prices according to the demand from the buyers, based on their preferences, and that yields an allocation for the core of the market game in a finite number of steps. With this scheme, all agents are simultaneously present and all sellers sell to both national and international markets. We prove that the core allocation produced by this mechanism provides the lowest price among all outcomes for the core that maintains the same allocations of objects for international buyers as the final allocation. In addition, it coincides with the competitive allocation of minimum price equilibrium, when restricted to the national market, and with the allocation produced by the GaleShapley algorithm (1962), in which buyers make proposals and where there is a convenient tie-breaking rule, when all buyers are from abroad.

Date: 2003
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