Prices, delay, and the dynamics of trade Moreno, Diego; Wooders, John

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Moreno, Diego ; Wooders, John
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Journal of Economic Theory
Equilibrium (Economics) -- Evaluation; Terms of trade; Economics
We characterize the dynamics of trading patterns and market composition when trade is bilateral, finding a trading pat trier is costly, prices arc determined by bargaining, and preferences are private information. We show that equilibrium is inefficient and exhibits delay as sellers price discriminate between buyers with different values. As frictions vanish, transaction prices are asymptotically competitive and the welfare loss of inefficient trading approaches zero. even though the trading patterns continue to be inefficient and delay persists.
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