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Fairness, price stickiness, and history dependence in decentralized trade
[journal article]
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 that serves as a common fairness b... view more
"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 that 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." [auhtor's abstract]... view less
Classification
National Economy
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
Random matching; Price stickiness; Social preferences; History dependence; Reference dependence
Document language
English
Publication Year
2009
Page/Pages
p. 502-514
Journal
Journal of Economic Behavior & Organization, 71 (2009) 2
DOI
https://doi.org/10.1016/j.jebo.2009.03.010
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)