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The Rate of Convergence to Perfect Competition of Matching and Bargaining Mechanisms

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  • Artyom Shneyerov
  • Adam Chi Leung Won

Abstract

We study the steady state of a market with incoming cohorts of buyers and sellers who are matched pairwise and bargain under private information. We first consider generalized random-proposer take-it-or-leave-it offer games (GRP TIOLI games). This class of games includes a simple random-proposer TIOLI game, but also many other interesting bargaining games. A friction parameter is tau, the length of the time period until the next meeting. We find that as tau (right arrow) 0, all market equilibria converge to the Walrasian limit, at the fastest possible rate Omicron (tau) among all bargaining mechanisms. Some important bargaining games not in this class may have non-convergent market equilibria. This is the case for the k-double auction: we find that there are equilibria that converge at a linear rate, those that converge at a slower rate or even not converge at all.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1467.

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Date of creation: Aug 2008
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Handle: RePEc:nwu:cmsems:1467

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Keywords: Matching and Bargaining; Search; Double Auctions; Foundations for Perfect Competition; Rate of Convergence;

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Citations

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Cited by:
  1. Majumdar, Dipjyoti & Shneyerov, Art & Xie, Huan, 2010. "How Optimism Leads to Price Discovery and Efficiency in a Dynamic Matching Market," Microeconomics.ca working papers artyom_shneyerov-2010-32, Vancouver School of Economics, revised 26 Oct 2010.
  2. Max Planck Institute & Stephan Lauermann, 2007. "Dynamic Matching and Bargaining Games: A General Approach," 2007 Meeting Papers 269, Society for Economic Dynamics.
  3. Adam Wong & Artyom Shneyerov, 2007. "Bilateral Matching and Bargaining with Private Information," 2007 Meeting Papers 1032, Society for Economic Dynamics.
  4. Shneyerov, Artyom & Wong, Adam Chi Leung, 2011. "The role of private information in dynamic matching and bargaining: Can it be good for efficiency?," Economics Letters, Elsevier, vol. 112(1), pages 128-131, July.
  5. Klaus Kultti, 2010. "Inefficiency caused by random matching and heterogeneity," Portuguese Economic Journal, Springer, vol. 9(1), pages 19-28, April.

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