|M.Sc Student||Biran Omer|
|Subject||Efficiency and the Final Consumer in Resale Markets with|
|Department||Department of Mathematics||Supervisor||Professor Ron Holzman|
|Full Thesis text|
A market where several agents trade one indivisible good over a given period of time is considered. At the initial stage of the economy the good is under the ownership of one of them, who may sell it to any of the other participants according to some predefined mechanism. Bilateral contracts are allowed and a selling proposal has the nature of a take-it-or-leave-it offer. The market description includes the value each agent assigns to the good in case she consumes it, together with externalities to each agent given the fact that the good is consumed by another. Under this setup any current owner of the good may find it profitable to transfer her ownership to another agent for an appropriate pay, in order to extract greater gain than the one expected by keeping the good and eventually consuming it. A similar consideration is being made by all non owners, and as they may find it worthwhile to buy the good in order to gain from consuming it in the future or reselling it, a trading process is initiated.
In the base line of our thesis stands the notion that regardless of the assignment of property rights the good is being consumed by the same agent. In 1999, Jehiel and Moldovanu presented a formal model, with any number of agents, and proved a theorem to this effect. Based on this idea we try to determine the identity of the final consumer depending on the externalities and valuations, and to find sufficient conditions for efficiency in this setup. Our main results are an algorithm to identify the final consumer in the 3 agent market, and a characterization of restricted patterns of externalities that ensure efficiency. These results shed new light on the question of efficiency in resale markets with externalities regardless of the assignment of property rights.