Posted Prices, Search and Bargaining

Derek Stacey

No 59, Working Papers from Toronto Metropolitan University, Department of Economics

Abstract: A model of a decentralized market is developed that features search frictions, advertised prices and bargaining. Sellers can post ask prices to attract buyers through a process of directed search, but ex post there is the possibility of negotiation. Similarly, buyers can advertise negotiable bid prices to attract sellers. Even when transaction prices often differ from quoted prices, bid and ask prices play a crucial role in directing search and reducing trading frictions. The theory endogenizes the direction of search and provides insight about the prevalence of posted prices in the absence of full commitment by market participants to transact at the advertised price.

Keywords: Bid and Ask Prices; Search Frictions; Price Commitment (search for similar items in EconPapers)
JEL-codes: D40 G12 L10 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015-08, Revised 2019-05
New Economics Papers: this item is included in nep-com, nep-dge, nep-ind and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Posted Prices, Search and Bargaining (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:rye:wpaper:wp059

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