Price formation in random matching model


STANĚK Rostislav

Year of publication 2011
Type Article in Proceedings
Conference Proceedings of the 29th International Conference Mathematical Methods in Economics 2011
MU Faculty or unit

Faculty of Economics and Administration

Field Economy
Keywords bargaining; random matching; decentralized market; extensive games
Description This paper is dealing with a question how are monetary prices determined in the random matching model. When answering this question current literature assumes that money or good is indivisible and solves this problem in Nash axiomatic bargaining framework. This paper provides a random matching model where prices are determined in sequential bargaining process and the indivisibility restrictions are not imposed. Determination of prices in this model does not depend on the marginal values but it is determined by the probability of nding a new trading partner. There is a price dispersion in the model when agents are heterogenous.
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