Template-Type: ReDIF-Paper 1.0
Author-Name: Derek G. Stacey
Author-X-Name-First: Derek
Author-X-Name-Last: Stacey
Author-Email: dstacey@economics.ryerson.ca
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada
Title: Posted Prices, Search and Bargaining
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.
Classification-JEL: D40; G12; L10
Keywords: Bid and Ask Prices, Search Frictions, Price Commitment
Length: 49 pages
Creation-Date: 2015-08
Revision-Date: 2019-05
Number: 059
File-URL: http://economics.ryerson.ca/workingpapers/wp059.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp059