Wednesday, July 20, 2016
Pere Gomis-Porqueras (Deakin University); Benoit Julien (University of New South Wales) and Liang Wang (University of Hawaii Manoa) analyze Competitive Search with Ex-post Opportunism.
ABSTRACT: We consider a frictional market where buyers are uncoordinated and sellers can not commit to a per-unit price and quantity of a divisible good ex-ante. By doing so sellers can exploit their local monopoly power by adjusting prices or quantities depending on the case once the local demand is realized. We find that when sellers can adjust quantities ex-post, then there exists a unique symmetric equilibrium where the increase in the buyer-seller ratio leads to higher quantities and prices in equilibrium. When sellers post ex-ante quantities and adjust prices ex-post, a symmetric equilibrium does not exist.