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Competitive bargaining equilibrium

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  • Dávila, J.
  • Eeckhout, J.

Abstract

In a simple exchange economy we propose a bargaining procedure that leads to a Walrasian outcome as the agents become increasingly patient. The competitive outcome therefore obtains even if agents have market power and are not price-takers. Moreover, where in other bargaining protocols the final outcome depends on bargaining power or relative impatience, the outcome here is determinate and depends only on preferences and endowments. Our bargaining procedure involves bargaining over prices and maximum quantity constraints, and it guarantees convergence to a Walrasian outcome for any standard exchange economy. In contrast, without quantity constraints we show that equilibrium is generically inefficient.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 139 (2008)
Issue (Month): 1 (March)
Pages: 269-294

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Handle: RePEc:eee:jetheo:v:139:y:2008:i:1:p:269-294

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Web page: http://www.elsevier.com/locate/inca/622869

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  1. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
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  4. Volij, Oscar & Serrano, Roberto, 2000. "Walrasian Allocations Without Price-Taking Behavior," Staff General Research Papers 5168, Iowa State University, Department of Economics.
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  8. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  9. Julio Dvila & Jan Eeckhout, 2002. "Is Bargaining over Prices Efficient?," Penn CARESS Working Papers 0915aad416461c93559b9430d, Penn Economics Department.
  10. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
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  13. Yildiz, Muhamet, 2003. "Walrasian bargaining," Games and Economic Behavior, Elsevier, vol. 45(2), pages 465-487, November.
  14. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  15. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  16. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-99, March.
  17. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
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Cited by:
  1. Julio Davila & Jan Eeckhout & C. Martinelli, 2009. "Bargaining over Public Goods," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00633592, HAL.
  2. repec:hal:journl:halshs-00633592 is not listed on IDEAS
  3. Penta, Antonio, 2011. "Multilateral bargaining and Walrasian equilibrium," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 417-424.
  4. repec:hal:journl:halshs-00289435 is not listed on IDEAS

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