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Markov equilibria in a model of bargaining in networks

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  • Abreu, Dilip
  • Manea, Mihai

Abstract

We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

Suggested Citation

  • Abreu, Dilip & Manea, Mihai, 2012. "Markov equilibria in a model of bargaining in networks," Games and Economic Behavior, Elsevier, vol. 75(1), pages 1-16.
    • Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:1-16
    DOI: 10.1016/j.geb.2011.09.004
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    Citations

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    Cited by:

    1. Thomas, Charles J., 2018. "An alternating-offers model of multilateral negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 149(C), pages 269-293.
    2. Donna, Javier D. & Schenone, Pablo & Veramendi, Gregory F., 2020. "Networks, frictions, and price dispersion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 406-431.
    3. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-2080, August.
    4. Qi Feng & Chengzhang Li & Mengshi Lu & J. George Shanthikumar, 2022. "Implementing Environmental and Social Responsibility Programs in Supply Networks Through Multiunit Bilateral Negotiation," Management Science, INFORMS, vol. 68(4), pages 2579-2599, April.
    5. Gauer, F. & Hellmann, T., 2017. "Strategic formation of homogeneous bargaining networks," Games and Economic Behavior, Elsevier, vol. 106(C), pages 51-74.
    6. Manea, Mihai, 2017. "Bargaining in dynamic markets," Games and Economic Behavior, Elsevier, vol. 104(C), pages 59-77.
    7. Kristal K. Trejo & Ruben Juarez & Julio B. Clempner & Alexander S. Poznyak, 2023. "Non-Cooperative Bargaining with Unsophisticated Agents," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 937-974, March.
    8. Dilmé, Francesc, 2023. "Bargaining in small dynamic markets," Journal of Economic Theory, Elsevier, vol. 207(C).
    9. Cho, Myeonghwan, 2021. "Trading networks of price-taking buyers and sellers," Journal of Economic Theory, Elsevier, vol. 196(C).
    10. Darpö, Erik & Domínguez, Alvaro & Martín-Rodríguez, María, 2023. "Formation of Networks in a Context with Diversity," AGI Working Paper Series 2023-02, Asian Growth Research Institute.
    11. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2016. "Networks: An Economic Perspective," Papers 1608.07901, arXiv.org.
    12. Bayati, Mohsen & Borgs, Christian & Chayes, Jennifer & Kanoria, Yash & Montanari, Andrea, 2015. "Bargaining dynamics in exchange networks," Journal of Economic Theory, Elsevier, vol. 156(C), pages 417-454.
    13. Talamàs, Eduard, 2019. "Price dispersion in stationary networked markets," Games and Economic Behavior, Elsevier, vol. 115(C), pages 247-264.

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    More about this item

    Keywords

    Bargaining; Decentralized markets; Equilibrium existence; Inefficiency; Markov perfect equilibrium; Networks; Random matching;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D6 - Microeconomics - - Welfare Economics
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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