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 use, no delay will be observed.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 188.
Date of creation: Feb 2006
Date of revision:
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
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- Ching-to Albert Ma & Michael Manove, 1991.
"Bargaining with Deadlines and Imperfect Player Control,"
0007, Boston University - Industry Studies Programme.
- Ma, Ching-To Albert & Manove, Michael, 1993. "Bargaining with Deadlines and Imperfect Player Control," Econometrica, Econometric Society, vol. 61(6), pages 1313-39, November.
- Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
- Satterthwaite, Mark & Shneyerov, Artyom, 2003.
"Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition,"
Microeconomics.ca working papers
shneyerov-03-12-17-09-36-, Vancouver School of Economics, revised 17 Dec 2003.
- Mark Satterthwaite & Artyom Shneyerov, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Discussion Papers 1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ponsati, Clara, 1995. "The deadline effect: A theoretical note," Economics Letters, Elsevier, vol. 48(3-4), pages 281-285, June.
- Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February.
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