Turnover externalities with marketplace trading

Melvyn G. Coles

Research output: Contribution to journalArticle

Abstract

This article considers equilibrium decentralized trade when there is a marketplace where buyers and sellers meet costlessly. Since buyers have idiosyncratic match payoffs for each seller's good, some buyers, rather than trade with the current stock of sellers, wait for new sellers to enter the marketplace to obtain a good they like. A turnover externality exists where all traders are better off with higher entry rates of new traders. Furthermore, this turnover externality supports multiple Pareto-rankable equilibria. This provides new insights into similar results obtained in the random-matching literature.

Original languageEnglish (US)
Pages (from-to)851-868
Number of pages18
JournalInternational Economic Review
Volume40
Issue number4
DOIs
StatePublished - Nov 1999

ASJC Scopus subject areas

  • Economics and Econometrics

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