A Walrasian Rubinstein and Wolinsky model

- We revisit Rubinstein and Wolinsky (1985) matching and bargaining model.
- Our innovation is to make the flows unbalanced, rather than the stocks.
- We present a necessary and sufficient condition for the limit price to be Walrasian.
- The condition is the alignment of the initial buyer and seller stocks with the flows.

We provide a full dynamic analysis of a continuous-time variant of Rubinstein and Wolinsky (1985) matching and bargaining model with unbalanced flows of buyers and sellers. The focus is on the price limit as the frictions of search are removed. It is found that a necessary and sufficient condition for the limit price to be Walrasian at all times is the alignment of the initial buyer and seller stocks with the flows.