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Multiple equilibria in bargaining models of decentralized trade (*)

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  • Charles E. Hyde

    (Department of Economics, University of Melbourne, Parkville, Melbourne, Victoria 3052, AUSTRALIA)

Abstract

A market in which population size is endogenously determined, is modeled. Buyers and sellers are randomly matched upon entering the market, whereupon they engage in non-cooperative bilateral bargaining. It is shown that general matching technologies and heterogeneity of buyer or seller populations often result in multiple market equilibria. Up to four equilibria can occur and the equilibria can always be ranked according to population size. Under some conditions all equilibria can also be Pareto ranked. The set of equilibria depends on the relative population sizes of different types of potential entrant, market entry costs, and the degree of differentiation between agents on the same side of the market.

Suggested Citation

  • Charles E. Hyde, 1997. "Multiple equilibria in bargaining models of decentralized trade (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(2), pages 283-307.
    • Handle: RePEc:spr:joecth:v:9:y:1997:i:2:p:283-307
    Note: Received: August 1, 1994; revised version July 31, 1995
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    Cited by:

    1. Godfrey Keller & Kevin Roberts & Margaret Stevens, 2007. "Unemployment, Participation and Market Size," Economics Series Working Papers 362, University of Oxford, Department of Economics.

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