On the efficiency of decentralized exchange with resale possibilities

This paper studies decentralized exchange by bilateral matching and bargain ing when resale is possible. Decentralized exchange involves the risk that goods and services may be allocated inefficiently; if low-valuation buyers consume while high-valuation buyers do not, then social welfare is reduced. If resale is possible and transaction costs are negligible, we would never theless expect an efficient allocation to result from decentralized exchang e. This paper suggests that this depends on the nature of the commodity; wh ile the allocation of a durable good will be efficient, the allocation of a "consumable" good need not.