WHO SEARCHES?*

We consider a directed search model with buyers and sellers and determine whether buyers look for sellers or vice versa. The buyers and sellers can choose to search or wait; what they do in equilibrium depends on the relative size of the two populations and the price formation mechanism. We study bargaining and auctions and find that when one population is much larger than the other the former searches and the latter waits. Under auction with roughly equal populations some buyers and sellers search and some wait. Our results challenge the practice of postulating who searches and who waits.     

The rate of convergence to perfect competition of matching and bargaining mechanisms

We study the steady state of a market with incoming cohorts of buyers and sellers who are matched pairwise and bargain under private information. A friction parameter is τ, the length of the time period until the next meeting. We provide a necessary and sufficient condition for the convergence of mechanism outcomes to perfect competition at the linear rate in τ, which is shown to be the fastest possible among all bargaining mechanisms. The condition requires that buyers and sellers always retain some bargaining power. The bargaining mechanisms that satisfy this condition are called nonvanishing bargaining power (NBP) mechanisms. Simple random proposer take-it-or-leave-it protocols are NBP, while k-double auctions (k-DA) are not. We find that k-DAs have equilibria that converge to perfect competition at a linear rate, converge at a slower rate or even do not converge at all.     

Trading mechanism selection with directed search when buyers are risk averse

We endogenize the trading mechanism selection in a model of directed search with risk averse buyers and show that the unique symmetric equilibrium entails all sellers using fixed price trading. Mechanisms that prescribe the sale price as a function of the realized demand (auctions, bargaining, discount pricing, etc.) expose buyers to the “price risk”, the uncertainty of not knowing how much to pay in advance. Fixed price trading eliminates the price risk, which is why risk averse customers accept paying more to shop at such stores.     

MEETINGS AND MECHANISMS

This article shows how meeting frictions affect equilibrium trading mechanisms and allocations in an environment where identical sellers post mechanisms to compete for buyers with ex ante heterogeneous private valuations. Multiple submarkets can emerge, each consisting of all sellers posting a particular mechanism and the buyers who visit those sellers. Under mild conditions, high-valuation buyers are all located in the same submarket, and low valuation buyers can be in: (i) the same submarket, (ii) a different submarket, and (iii) a mixture of (i) and (ii). The decentralized equilibrium is efficient when sellers can post auctions with reserve prices or entry fees.     

Market behavior in bid,offer, and double auctions: A Reexmination

This study examines the robustness of the previously observed [Smith (1964)] differences in market behavior between double auctions (both buyers and sellers may enter price quotes), bid auctions (only buyers may enter price quotes), and offer auctions (only sellers may enter price quotes). Based on the results of twenty-one market experiments, we find little support for the a priori hypothesis that bid auction prices tend to be greater than double auction prices which tend to be greater than offer auction prices.     

Disapproval aversion or inflated inequity acceptance? The impact of expressing emotions in ultimatum bargaining

Past experimental research has shown that when rating systems are available, buyers are more generous in accepting unfair offers in ultimatum bargaining. However, it also suggests that, under these conditions, sellers behave more fairly to avoid receiving negative feedback. This paper experimentally investigates which effect is stronger with the use of a rating system: buyers’ inflated inequity acceptance or sellers’ disapproval aversion. We explore this question by varying the information condition on the buyers’ side. Our experiment shows that in a setup where the size of the pie is common knowledge for both buyers and sellers, when a rating system is present, the sellers exhibit disapproval aversion but the buyers do not display greater acceptance of inequity. By contrast, when only sellers are aware of the size of the pie, sellers behave aggressively to exploit buyers and their behavior does not change in the presence of a rating system; however, buyers display greater acceptance of inequity when a rating system is present. We discuss how these results can be explained by a theoretical model that includes sellers’ social disapproval aversion and buyers’ disappointment aversion in addition to the players’ inequality aversion.     

About market structure

I study an economy where sellers choose locations, and buyers choose which location to visit. All sellers in one location correspond to the Walrasian market while each seller in a separate location corresponds to the standard random matching model. Trades are consummated in auctions, and it turns out that the Walrasian market is not an equilibrium market structure. Rather, the sellers choose to distribute themselves in several locations endogenously creating the imperfectness of markets. I determine the number of sellers per location in equilibrium as a function of the ratio of buyers to sellers.     

THE HIDDEN COST OF BARGAINING: EVIDENCE FROM A CHEATING-PRONE MARKETPLACE

It is widely believed that successful bargaining helps consumers increase their surplus. We present evidence from a field experiment showing that bargaining over price reduces buyer surplus in a marketplace where sellers cheat on the weight whose value may more than offset the price discount. Our results show that bargaining entails hidden costs since sellers cheat significantly more when buyers bargain than not and they cheat significantly more when bargaining succeeds than fails. Overall bargaining reduces buyer surplus than not bargaining. Our result is relevant for credence goods markets where bargaining over prices may induce sellers to “undertreat” more.     

Seller competition by mechanism design

This paper analyzes a market game in which sellers offer trading mechanisms to buyers and buyers decide which seller to go to depending on the trading mechanisms offered. In a (subgame perfect) equilibrium of this market, sellers hold auctions with an efficient reserve price but charge an entry fee. The entry fee depends on the number of buyers and sellers, the distribution of buyer valuations, and the buyer cost of entering the market. As the size of the market increases, the entry fee decreases and converges to zero in the limit. We study how the surplus of buyers and sellers depends on the number of agents on each side of the market in this decentralized trading environment.     

Strategic delay and endogenous offers in bargaining games with private information

This paperendogenously determines the order of offers and the duration of delay in reaching agreement between buyers and sellers in a continuous-time bargaining game in which a seller wishes to vend an object of known cost to a buyer, to whom the value of the good is private information, and in which each player can choose to strategically delay a response to a previous offer or to interrupt the delay of his rival. Both buyers and sellers are shown to prefer to move first in a model of bargaining in which: (1) either player can make the first offer; (2) after the minimum time has elapsed from the previous offer, either player can make an offer; and (3) players can choose to strategically delay and refrain from making an offer after the previous offer. When the buyer moves first, the equilibrium response for the seller is to accept the offer immediately. When the seller moves first the equilibrium is characterized by the seller making all but the last offer, with minimal feasible delay between successive offers. Observable endogenous delay in reaching an agreement in such equilibria approaches zero as the minimal feasible delay between offers approaches zero. This indicates that in noncooperative bargaining models with private information, where players can strategically delay their offers, endogenizing the order in which players make offers removes the ability of informational asymmetries to generate equilibria exhibiting endogenous delay in reaching an agreement.     

Evolutionary stability of bargaining and price posting: implications for formal and informal activities

In this paper we study the co-existence of two well known trading protocols, bargaining and price-posting. To do so we consider a frictional environment where buyers and sellers play price-posting and bargaining games infinitely many times. Sellers switch from one market to the other at a rate that is proportional to their payoff differentials. Given the different informational requirements associated with these two trading mechanisms, we examine their possible co-existence in the context of informal and formal markets. Other than having different trading protocols, we also consider other distinguishing features. We find a unique stable equilibrium where price-posting (formal markets) and bargaining (informal markets) co-exist. In a richer environment where both sellers and buyers can move across markets, we show that there exists a unique stable dynamic equilibrium where formal and informal activities also co-exist whenever sellers’ and buyers’ net costs of trading in the formal market have opposite signs.     

COMPETITIVE PRICING AND EFFICIENCY IN SEARCH EQUILIBRIUM*

We consolidate and generalize some results on price determination and efficiency in search equilibrium. Extending models by Rubinstein and Wolinsky and by Gale, heterogeneous buyers and sellers meet according to a general matching technology and prices are determined by a general bargaining condition. When the discount rate r and search costs converge to 0, we show that prices in all exchanges are the same and equal the competitive, market clearing, price. Given positive search costs, efficiency obtains iff bargaining satisfies Hosios' condition and r=0. When prices are set by third‐party market makers, however, we show that search equilibrium is necessarily efficient.     

A structural model of competing sellers: Auctions and posted prices

In an original data set of goods listed for sale online, I observe that both auctions and posted prices are popular with buyers and sellers in the compact-disc market. To explain why these two mechanisms coexist, I estimate a structural model of competing sellers who differ in the value of their outside options. Buyers are allowed to value auctioned and posted-price goods differently but the estimated value distributions suggest that differences across buyers do not explain the mechanism coexistence that I observe. In contrast, differences across sellers' outside options are important: the value of the outside option segments the market with high outside-option sellers choosing to post a fixed price. There are two key forces at work that drive this empirical result. First, competition between sellers favors coexistence over an auction-only or a posted-price-only marketplace because sellers prefer to be in a market with fewer rivals. Second, sellers with more valuable outside options prefer the posted-price mechanism because posted-price goods sell less often than auctioned goods but at a higher price. As a result, a larger outside option reduces the loss from not selling and favors the posted-price mechanism.     

“将心比心”能促进双赢吗?——换位思考在买卖谈判中的作用

本文通过模拟谈判的方式发现，在买卖谈判中，谈判者的换位思考能够促进双赢，并提高关系的质量。并且，在谈判中不同的角色也会影响到换位思考，卖方比买方有着更多的换位思考行为。最后，买方的换位思考比卖方更能影响谈判结果的整合程度。综合起来，该结果表明，在谈判中谈判者应尽量进行换位思考以提高整合性，买方尤其应注意这一点。     

Whose feedback matters? Empirical evidence from online auctions

The seller rating systems based on feedback are routinely used to minimize risks in online auctions. We explore the effects of the feedback from buyers and sellers separately. The results reveal that feedback from auction issuer’s selling activity increase both sales and new visits of auction. The effects of feedback from buying activity are significant only for visits.     

Equilibrium in Auction and Bargaining Markets When Agents Can Wait and Search

The paper studies two market structures and two modes of trade. The agents, buyers and sellers, can choose whether to stay or search. The meetings take place randomly, and trades are consummated by auction or by bargaining. There are altogether four possible markets but in equilibrium at most two markets are active simultaneously. There is almost always a unique evolutionary stable equilibrium which consists of an auction market when the numbers of buyers and sellers differ greatly, and two simultaneous auction markets when the numbers are relatively close.     

Internet auctions with many traders

We study a multi-unit auction environment similar to eBay. Sellers, each with a single unit of a homogeneous good, set reserve prices at their own second-price auctions. Each buyer has private value for the good and wishes to acquire a single unit. Buyers can bid as often as they like and move between auctions. We characterize a perfect Bayesian equilibrium for this decentralized dynamic mechanism in which, conditional on reserve prices, an efficient set of trades occurs at a uniform price. In a large but finite market, the sellers set reserve prices equal to their true costs under a very mild distributional assumption, so ex post efficiency is achieved. Buyers’ strategies in this equilibrium are simple and do not depend on their beliefs about other buyers’ valuations, or the number of buyers and sellers.     

Surplus Extraction and Competition

A competitive economy is studied in which sellers offer alternative direct mechanisms to buyers who have correlated private information about their valuations. In contrast to the monopoly case where sellers charge entry fees and extract all buyers' surplus, it is shown that in the unique symmetric equilibrium with competition, sellers hold second price auctions with reserve prices set equal to their cost. Most important, it is a best reply for sellers not to charge entry fees of the kind normally used to extract surplus, even though it is feasible for them to do so.     

A note on Peters and Severinov, “Competition among sellers who offer auctions instead of prices”

We consider a market in which sellers compete for buyers by advertising reserve prices for second-price auctions. Applying the limit equilibrium concept developed in Peters and Severinov (1997) [1], we show that the competitive matching equilibrium is characterized by a reserve price of zero. This corrects a result in Peters and Severinov (1997) [1].     

Bargaining in a network of buyers and sellers

We analyze bargaining between buyers and sellers who are connected by an exogenously given network. Players can make repeated alternating public offers that may be accepted by any of the responders linked to each specific proposer. Our purpose is to find the conditions of the network which drive the price distribution in equilibrium. This paper uses graph theory tools to provide necessary and sufficient conditions regarding the architecture of networks for the subgame perfect equilibrium of the bargaining game to coincide with the Walrasian outcome.