Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/268026 
Year of Publication: 
2022
Series/Report no.: 
ECONtribute Discussion Paper No. 193
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
This paper studies trade in endogenously evolving markets exhibiting few traders at any given point in time. Traders arrive in the market and bargain until they complete a trade. We find that, unlike large markets, small markets feature trade delay and price dispersion, even when sellers and buyers are homogeneous and matching frictions are small. We characterize transaction prices as a function of the endogenous evolution of the market composition and economic conditions, providing several novel comparative statics results. Our analysis highlights the need to incorporate sub-market structures into the theoretical study of job, real estate, and rental markets, where trade opportunities are typically constrained by both the geographical location and individual characteristics of each trader.
Subjects: 
Small dynamic markets
decentralized bargaining
trade delay
JEL: 
C73
C78
D53
G12
Document Type: 
Working Paper

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