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Competitive Bargaining Equilibria

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Abstract

We propose a simple bargaining procedure, the equilibrium of which converges to the Walrasian allocation as the agents become increasingly patient. We thus establish that the competitive outcome obtains even if agents have market power and are not price-takers. Moreover, where in other bargaining protocols the final outcome depends on bargaining power or relative impatience, the outcome here is determinate and depends only on preferences and endowments. This procedure has therefore important implications for policy applications compared to standard bargaining rules.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/B04067.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number b04067.

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Length: 37 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:mse:wpsorb:b04067

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Keywords: Alternating-offers bargaining; Walrasian equilibrium; price-setting; quantity constraints.;

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References

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  1. Serrano, Roberto & Volij, Oscar, 2000. "Walrasian Allocations without Price-Taking Behavior," Journal of Economic Theory, Elsevier, vol. 95(1), pages 79-106, November.
  2. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  3. Moldovanu, Benny & Fieseler, Karsten & Kittsteiner, Thomas, 1999. "Partnerships, Lemons and Efficient Trade," Sonderforschungsbereich 504 Publications 01-18, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  4. Benny Moldovanu, 2002. "How to Dissolve a Partnership," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 66-, March.
  5. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  6. Julio Dvila & Jan Eeckhout, 2002. "Is Bargaining over Prices Efficient?," Penn CARESS Working Papers 0915aad416461c93559b9430d, Penn Economics Department.
  7. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  8. Takashi Kunimoto & Roberto Serrano, 2002. "Bargaining and Competition Revisited," Working Papers 2002-14, Brown University, Department of Economics.
  9. Peter Cramton & Robert Gibbons & Paul Klemperer, 1987. "Dissolving a Partnership Efficiently," Papers of Peter Cramton 87econ, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  10. Sutton, John, 1986. "Non-cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 709-24, October.
  11. Gale, Douglas M, 1986. "Bargaining and Competition Part II: Existence," Econometrica, Econometric Society, vol. 54(4), pages 807-18, July.
  12. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-99, March.
  13. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  14. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  15. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  16. Yildiz, Muhamet, 2003. "Walrasian bargaining," Games and Economic Behavior, Elsevier, vol. 45(2), pages 465-487, November.
  17. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
  18. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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Cited by:
  1. repec:hal:cesptp:halshs-00289435 is not listed on IDEAS
  2. Penta, Antonio, 2011. "Multilateral bargaining and Walrasian equilibrium," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 417-424.
  3. Julio D�Vila & Jan Eeckhout & César Martinelli, 2009. "Bargaining over Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(6), pages 927-945, December.
  4. repec:hal:journl:halshs-00633592 is not listed on IDEAS
  5. repec:hal:journl:halshs-00289435 is not listed on IDEAS

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