We develop the theoretical underpinnings of pairwise random matching mechanisms. We formalize the mechanics of matching, and study the links between properties of the different mechanisms and trade frictions. A particular emphasis is placed on providing exact mappings between matching...

We study markets with two types of agents. Sellers have an indivisible good for sale, and their reservation value is zero. Buyers are randomly matched with sellers, and they value the good at unity. Sellers may be matched with any positive number of buyers, and they may choose to determine the...

Many economic models use a continuum of negligible agents to avoid considering one person's effect on aggregate characteristics of the economy. Along with a continuum of agents, these models often incorporate a sequence of independent shocks and random matchings. Despite frequent use of such...

Numerous economic models employ a continuum of negligible agents with a sequence of idiosyncratic shocks and random matchings. Several attempts have been made to build a rigorous mathematical justification for such models, but these attempts have left many questions unanswered. In this paper, we...

We determine the equilibrium in two transaction mechanisms: auctions and posted prices. Agents choose whether to participate in markets where trades are consummated by auctions or in markets where sellers post prices. We show that the selling mechanisms are practically equivalent. Previous...

Random matching models with a continuum population are widely used in economics to study environments where agents interact in small coalitions. This paper provides foundations to such models. In particular, the paper establishes an existence result for random matchings that are universal in the...

We study how group size affects cooperation in an infinitely repeated n-player Prisoner's Dilemma (PD) game. In each repetition of the game, groups of size n less than or equal to M are randomly and anonymously matched from a fixed population of size M to play the n-player PD stage game. We...

This paper studies bargaining and exchange in a networked market with intermediation. Possibilities to trade are restricted through a network of existing relationships and traders bargain over the division of available gains from trade along different feasible routes. Using a stochastic model of...

The present paper investigates the functioning of an Emission Trading System (ETS) and its impact on the diffusion of environmental-friendly technological innovation in the presence of firms’ strategic behaviours and sanctions to non-compliant firms. For this purpose, we study an evolutionary...