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Bilateral Trading in Networks

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  • Daniele Condorelli

    ()

  • Andrea Galeotti

    ()

Abstract

We study an incomplete-information model of sequential bargaining for a single object, with the novel feature that agents are located in a network. In each round of trade, the current owner of the object either consumes it or makes a take-it-or-leave-it offer to some connected trader. Traders may buy in order to consume or to resale to others. We show that the equilibrium price dynamics is non-monotone and that traders that intermediate the object arise endogenously and attain a pro t. We also provide insights on how traders' equilibrium payoffs depend on their location in the network.

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Bibliographic Info

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 704.

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Date of creation: 01 Mar 2012
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Handle: RePEc:esx:essedp:704

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References

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  1. Zheng, Charles Zhoucheng, 2002. "Optimal Auction with Resale," Staff General Research Papers 12664, Iowa State University, Department of Economics.
  2. Giacomo Calzolari & Alessandro Pavan, 2004. "Monopoly with Resale," Discussion Papers 1393, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Parkes, David C. & Tennenholtz, Moshe, 2009. "Special Section of Games and Economic Behavior dedicated to the 8th ACM Conference on Electronic Commerce," Games and Economic Behavior, Elsevier, vol. 67(1), pages 1-1, September.
  4. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
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Cited by:
  1. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," CORE Discussion Papers 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Daniele Condorelli & Andrea Galeotti, 2012. "Endogenous Trading Networks," Economics Discussion Papers 705, University of Essex, Department of Economics.

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