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© Christian Korth, Stefan NapelFairness, Price Stickiness, and History Dependence in Decentralized Trade (2008)
BibTeX
@MISC{Korth08©christian,
author = {Christian Korth and Stefan Napel and Regina T. Riphahn and Ph. D and Christian Korth A and Stefan Napel A},
title = {© Christian Korth, Stefan NapelFairness, Price Stickiness, and History Dependence in Decentralized Trade},
year = {2008}
}
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Abstract
The paper investigates price formation in a decentralized market with random matching. Agents are assumed to have subdued social preferences: buyers, for example, prefer a lower price to a higher one but experience reduced utility increases below a reference price which serves as a common fairness benchmark. The strategic equilibrium reflects market fundamentals, but it is markedly less sensitive to the buyer-seller ratio near the fair price benchmark. Prices may be sticky around very different reference levels in markets with otherwise identical fundamentals. The implied history dependence turns out to be mitigated rather than exacerbated by friction.
Keyphrases
price stickiness stefan napelfairness decentralized trade history dependence christian korth buyer-seller ratio common fairness benchmark different reference level identical fundamental decentralized market market fundamental price formation utility increase implied history dependence social preference fair price benchmark reference price strategic equilibrium
