Endogenous Transactions Costs in Multi-Seller Model Menezes, Flavio; Pitchford, Rohan

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Authors
Menezes, Flavio ; Pitchford, Rohan
Subjects
equilibrium delay; transactions costs; multi-seller model
Summary
We examine the problem of a buyer who wishes to purchase and combine <i>n</i> objects owned by <i>n</i> individual owners to realize a higher value. The owners are able to delay their entry into the sale process: They can either sell now or sell later. Among other assumptions, the simple assumption of competition - that the presence of more owners at point of sale reduces their surplus - and discounting lead to interesting results: There is costly delay in equilibrium. Moreover, with sufficiently strong competition, the probability of delay increases with <i>n</i>. Thus, buyers who discount the future will face increased costs as the number of owners increases. The source of transaction costs is the owners' desire to dis-coordinate in the presence of competition. These costs are unrelated to transactions costs currently identified in the literature, specifically those due to asymmetric information, or public goods problems where players impose negative externalities on each other by under-contributing.
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http://trove.nla.gov.au/work/120353
Work ID
120353

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