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The provision of quality in a bilateral search market

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  • Clara Ponsati
  • Jozsef Sakovics

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Abstract

We accomplish two goals. First, we provide a non-cooperative foundation for the use of the Nash bargaining solution in search markets. This finding should help to close the rift between the search and the matching-and-bargaining literature. Second, we establish that the diversity of quality offered (at an increasing price-quality ratio) in a decentralized market is an equilibrium phenomenon -even in the limit as search frictions disappear.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 86.

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Length: 22
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:edn:esedps:86

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Keywords: quality dispersion; Nash Program; bilateral search.;

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  1. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
  2. Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 278-88, March.
  3. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, Econometric Society, vol. 54(4), pages 785-806, July.
  4. Bester,Helmut, 1986. "Bargaining,Search costs and equilibrium price distribution," Discussion Paper Serie A 49, University of Bonn, Germany.
  5. Sakovics, J. & Ponsati, C., 1995. "Rubinstein Batgaining with Tow-Sided Options," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 318.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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