Journal Article

A Decentralized Market with Common Values Uncertainty: Non-Steady States

Max R. Blouin and Roberto Serrano

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 68, issue 2, pages 323-346
Published in print April 2001 | ISSN: 0034-6527
Published online April 2001 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00171
A Decentralized Market with Common Values Uncertainty: Non-Steady States

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We analyse a market where (i) trade proceeds by random and anonymous pairwise meetings with bargaining; (ii) agents are asymmetrically informed about the value of the traded good; and (iii) no new entrants are allowed once the market is open. We show that information revelation and efficiency never obtain in equilibrium, even as discounting is removed. This holds whether the asymmetry is two-sided or one-sided. In some cases there exist equilibria where a substantial amount goes untraded. This contrasts with the earlier literature, which was based on the steadystate equilibria of a model where agents enter the market every period.

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Subjects: Economics

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