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Decentralized Trade with Bargaining and Voluntary Matching

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Author Info

  • : Ebbe Hendon

    (Institute of Economics, University of Copenhagen)

  • Birgitte Sloth

    (Institute of Economics, University of Copenhagen)

  • Torben Tranæs

    (Institute of Economics, University of Copenhagen)

Abstract

Rubinstein and Wolinsky (1990) study a market with one seller, two buyers, and voluntary matching. Both the competitive outcome p[subscript c] and the bilateral bargaining outcome p[subscript b] are possible in subgame perfect equilibrium. We consider two variations. First, if there is a cost larger that p[subscript c]-p[subscript b] to the seller of changing partner, p[subscript b] is the unique outcome, otherwise no restriction expires. In the second variation the seller makes an Epsilon-binding preannouncement of whether he will change buyers after disagreement. If Epsilon is small there are equilibrium prices close to p[subscript b]. But for any Epsilon, if the discount factor is close to 1, the unique equilibrium price is p[subscript c].

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 93-08.

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Length: 29 pages
Date of creation: Sep 1993
Date of revision:
Publication status: Published in: Economic Design, 1994, 1(1) pp 55-77
Handle: RePEc:kud:kuiedp:9308

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Related research

Keywords: decentralized trade; competitive equilibrium; sequential bargaining; markets;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
  3. Hendon, Ebbs & Tranaes, Torben, 1991. "Sequential bargaining in a market with one seller and two different buyers," Games and Economic Behavior, Elsevier, Elsevier, vol. 3(4), pages 453-466, November.
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Cited by:
  1. Sempere-Monerris, José J. & Vannetelbosch, Vincent J., 1997. "Bargaining with Externalities: Licensing of an Innovation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 1997007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 22(2), pages 293-304, May.
  3. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, Elsevier, vol. 45(1), pages 83-103, February.

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