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CORR
2006
Springer

An equilibrium model for matching impatient demand and patient supply over time

8 years 10 months ago
An equilibrium model for matching impatient demand and patient supply over time
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism used in stock markets. Both buyers and sellers are elastic in the price-quantity space; however, only the sellers are assumed to be patient, i.e. only the sellers have a price - time elasticity, whereas the buyers are assumed to be impatient. Sellers select their selling price as a best response to all the other sellers' strategies. We define and establish the existence of the equilibrium in this model and show how to numerically compute this equilibrium. We also show how to compute other relevant quantities such as the equilibrium expected time to sale and equilibrium expected order density, as well as the expected order density conditioned on current selling price. We derive a closed form for the equilibrium distribution when the demand is pri...
Garud Iyengar, Anuj Kumar
Added 11 Dec 2010
Updated 11 Dec 2010
Type Journal
Year 2006
Where CORR
Authors Garud Iyengar, Anuj Kumar
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