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Decentralized Trade with Bargaining and Voluntary Matching

Author

Listed:
  • : Ebbe Hendon

    (Institute of Economics, University of Copenhagen)

  • Birgitte Sloth

    (Institute of Economics, University of Copenhagen)

  • Torben Tranæs

    (Institute of Economics, University of Copenhagen)

Abstract

Rubinstein and Wolinsky (1990) study a market with one seller, two buyers, and voluntary matching. Both the competitive outcome p[subscript c] and the bilateral bargaining outcome p[subscript b] are possible in subgame perfect equilibrium. We consider two variations. First, if there is a cost larger that p[subscript c]-p[subscript b] to the seller of changing partner, p[subscript b] is the unique outcome, otherwise no restriction expires. In the second variation the seller makes an Epsilon-binding preannouncement of whether he will change buyers after disagreement. If Epsilon is small there are equilibrium prices close to p[subscript b]. But for any Epsilon, if the discount factor is close to 1, the unique equilibrium price is p[subscript c].

Suggested Citation

  • : Ebbe Hendon & Birgitte Sloth & Torben Tranæs, 1993. "Decentralized Trade with Bargaining and Voluntary Matching," Discussion Papers 93-08, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9308
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Hendon, Ebbs & Tranaes, Torben, 1991. "Sequential bargaining in a market with one seller and two different buyers," Games and Economic Behavior, Elsevier, vol. 3(4), pages 453-466, November.
    3. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
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    Cited by:

    1. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
    2. Sempere-Monerris, José J. & Vannetelbosch, Vincent J., 1997. "Bargaining with Externalities: Licensing of an Innovation," LIDAM Discussion Papers IRES 1997007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 293-304, May.
    4. Tranaes, Torben, 1998. "Tie-Breaking in Games of Perfect Information," Games and Economic Behavior, Elsevier, vol. 22(1), pages 148-161, January.
    5. Wooders, John, 1998. "Walrasian equilibrium in matching models," Mathematical Social Sciences, Elsevier, vol. 35(3), pages 245-259, May.

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    More about this item

    Keywords

    decentralized trade; competitive equilibrium; sequential bargaining; markets;
    All these keywords.

    JEL classification:

    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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