The Power of Search Technology in Arbitrage
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The Power of Search Technology in Arbitrage

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@GloriousGlacier

Questions and Answers

Reduced search costs would not lead to more arbitrage unless it affected the ability to sustain such ______

constraints

In the region of study, fishermen reported no such ______ on fish marketing during this period

constraints

For example, with a linear demand curve, P ⫽ a ⫺ bQ, the percent increase in welfare from arbitrage is given by Xb(Q H ⫺ Q L ⫺ X)/(a(Q H ⫹ Q L ) ⫺.5b(Q 2L ⫹ Q 2H )). If a ⫽ 10, b ⫽.1, QL ⫽ 1, and QH ⫽ 9, the gain ranges from 12 percent when one fish is arbitraged to 27 percent when ______ fish are arbitraged (though we must subtract transportation costs)

four

Consider the case with zero search costs and perfect information; in equilibrium, the price difference between the markets is ␶ /x̃, where x̃ is the catch of the marginal fisherman who ______

<p>switches</p> Signup and view all the answers

Then the area of rectangle C above P(QH – X) (i.e., the top point of the quasi-trapezoid E⫹F) is (X/x̃)␶. Note that (X/x̃) is greater than the total number of ______ who switch markets

<p>fishermen</p> Signup and view all the answers

the ______ barked

<p>dog</p> Signup and view all the answers

the ______ meowed

<p>cat</p> Signup and view all the answers

Fishermen may collude to punish buyers who purchase from nonlocal fishermen, buyers may collude to punish fishermen who sell outside their local market, or there may be interlinked transactions, such as when a fisherman receives credit from a buyer and in exchange must always sell to them (as seen in Giné and Klonner and Platteua ). In these cases, reduced search costs would not lead to more arbitrage unless it affected the ability to sustain such ______. Answer

<p>constraints</p> Signup and view all the answers

Then the area of rectangle C above P(QH – X) (i.e., the top point of the quasi-trapezoid E⫹F) is (X/x̃)␶. Note that (X/x̃) is greater than the total number of ______ who switch markets. Answer

<p>fishermen</p> Signup and view all the answers

For example, with a linear demand curve, P ⫽ a ⫺ bQ, the percent increase in welfare from arbitrage is given by Xb(Q H ⫺ Q L ⫺ X)/(a(Q H ⫹ Q L ) ⫺.5b(Q 2L ⫹ Q 2H )). If a ⫽ 10, b ⫽.1, QL ⫽ 1, and QH ⫽ 9, the gain ranges from 12 percent when one fish is arbitraged to 27 percent when ______ fish are arbitraged (though we must subtract transportation costs). Answer

<p>four</p> Signup and view all the answers

Consider the case with zero search costs and perfect information; in equilibrium, the price difference between the markets is ␶ /x̃, where x̃ is the catch of the marginal fisherman who ______. Answer

<p>switches</p> Signup and view all the answers

In the region of study, fishermen reported no such ______ on fish marketing during this period. Answer

<p>constraints</p> Signup and view all the answers

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