Models of Strategic and Pairwise Trade
Open Access
- Author:
- Liao, Mouhua
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 04, 2012
- Committee Members:
- Neil Wallace, Dissertation Advisor/Co-Advisor
Neil Wallace, Committee Chair/Co-Chair
Edward James Green, Committee Member
James Schuyler Jordan, Committee Member
Anthony Mark Kwasnica, Committee Member - Keywords:
- Market game
Limit orders
Nash equilibrium
Walras equilibrium
OTC market
Periodic market
Random search
Middlemen - Abstract:
- This dissertation consists of three chapters. In Chapter 1, a new type of market game is formulated: the strategy space generalizes the usual Cournot quantities with limit prices. Under mild market-thickness conditions, symmetric Nash equilibria coincide with price-taking equilibria. In the case of two goods, a price-taking equilibrium is a Walrasian equilibrium. In the case of multiple goods, a price-taking equilibrium is competitive, but subject to a cash-in-advance constraint. Chapter 2 considers periodic, complete-participation trade in the Lagos-Rocheteau (Econometrica, 2009) Mode. Lagos-Rocheteau is part of the literature that applies a search model to asset trade in the over-the-counter market. The only friction in their model is a cost of agents getting into contact with other agents. Therefore, as an alternative to their investor-dealer random meetings, a centralized competitive market which occurs periodically is studied. This arrangement preserves the main tension in their paper: a tradeoff between a portfolio that maximizes current utility and one that is good on average. For calibrated versions of the model, it is shown that this market must occur only infrequently in order for investors to be as well off as they in the Lagos-Rocheteau setup. In Chapter 3, employment agents (called as em-agents) are introduced as a third type of agent in world of a labor market with search frictions. Each type of agent matches pairwise with the other two types through two independent matching processes. Each process depends on the ratio of the agent's own type to the other type in the match ( market tightness). Job matches can be formed directly between a worker and a firm, or indirectly through an em-agent. It is shown that there is a unique steady-state equilibrium in which em-agents are active. The presence of em-agents enhances the welfare of workers. More generally, the welfare of workers decreases as the outside option of em-agents or firms increases. When job matches are heterogeneous in productivity, jobs filled through em-agents have higher average productivity than ones done directly.