Competitive bargaining equilibrium
AbstractIn 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 InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 139 (2008)
Issue (Month): 1 (March)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Julio Davila & Jan Eeckhout, 2004. "Competitive Bargaining Equilibria," Cahiers de la Maison des Sciences Economiques b04067, Université Panthéon-Sorbonne (Paris 1).
- Julio Dávila & Jan Eeckhout, 2004. "Competitive Bargaining Equilibrium," PIER Working Paper Archive 04-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- DAVILA, Julio & EECKHOUT, Jan, . "Competitive bargaining equilibrium," CORE Discussion Papers RP -2069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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