Dynamic Matching and Bargaining: The Role of Deadlines
AbstractWe consider a dynamic model where traders in each period are matched randomly into pairs who then bargain about the division of a fixed surplus. When agreement is reached the traders leave the market. Traders who do not come to an agreement return next period in which they will be matched again, as long as their deadline has not expired yet. New traders enter exogenously in each period. We assume that traders within a pair know each other's deadline. We define and characterize the stationary equilibrium configurations. Traders with longer deadlines fare better than traders with short deadlines. It is shown that the heterogeneity of deadlines may cause delay. It is then shown that a centralized mechanism that controls the matching protocol, but does not interfere with the bargaining, eliminates all delay. Even though this efficient centralized mechanism is not as good for traders with long deadlines, it is shown that in a model where all traders can choose which mechanism to
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 660.06.
Date of creation: 01 Feb 2006
Date of revision: 19 Apr 2006
Bargaining; Deadlines; Markets;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-26 (All new papers)
- NEP-DGE-2006-02-26 (Dynamic General Equilibrium)
- NEP-GTH-2006-02-26 (Game Theory)
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