1. Equilibria in Matching Markets with Soft and Hard Liquidity Constraints
- Subjects
Rationing ,Licensing ,Incomplete Markets ,soft liquidity constraints ,Competitive equilibrium ,d52 - Incomplete Markets ,quantity-constrained competitive equilibrium ,limit result ,d45 - "Rationing ,Licensing" ,hard liquidity constraints ,c72 - Noncooperative Games ,matching with contracts ,Bargaining Theory ,Matching Theory ,Expectational Equilibrium ,Noncooperative Games ,c78 - "Bargaining Theory ,Matching Theory" - Abstract
We consider a matching with contracts model in the presence of liquidity constraints on the buyers side. Liquidity constraints can be either soft or hard. A convergent sequence of economies with increasingly stringent soft liquidity constraints is an economy with hard liquidity constraints at the limit. The limit of a corresponding convergent sequence of competitive equilibria may fail to be a competitive equilibrium in the limit economy. We establish limit results of two alternative notions of competitive equilibrium, quantity-constrained competitive equilibrium and expectational equilibrium, which do not suffer from such discontinuity problems. The implications of these limit results are discussed.
- Published
- 2021