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Posted Prices, Search and Bargaining

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  • Derek G. Stacey

    (Department of Economics, Ryerson University, Toronto, Canada)

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.

Suggested Citation

  • Derek G. Stacey, 2015. "Posted Prices, Search and Bargaining," Working Papers 059, Toronto Metropolitan University, Department of Economics, revised May 2019.
    • Handle: RePEc:rye:wpaper:wp059
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    File URL: https://www.arts.ryerson.ca/economics/repec/pdfs/wp059.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Ian King & Frank Stähler, 2018. "Capital Utilization and Search Unemployment in Dynamic General Equilibrium," Discussion Papers Series 598, School of Economics, University of Queensland, Australia.
    3. Stefano Banfi & Benjamín Villena-Roldán, 2019. "Do High-Wage Jobs Attract More Applicants? Directed Search Evidence from the Online Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 715-746.
    4. Shi, Shouyong, 2023. "Sequentially mixed search and equilibrium price dispersion," Journal of Economic Theory, Elsevier, vol. 213(C).
    5. Mantell, Edmund H., 2021. "The economics of posted prices in a concentrated market where demand is uncertain," Research in Economics, Elsevier, vol. 75(4), pages 365-375.
    6. Severinov, Sergei & Virag, Gabor, 2024. "Who wants to be an auctioneer?," Journal of Economic Theory, Elsevier, vol. 217(C).

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    More about this item

    Keywords

    Bid and Ask Prices; Search Frictions; Price Commitment;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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