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Bilateral Matching and Latin Squares

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Author Info
Camera, Gabriele
Selcuk, Cemil

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Abstract

We study equilibrium prices and trade volume with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique sub-game perfect equilibrium exists. It is characterized by absence of costly bargaining delays and each trade is settled at a different price. Prices increase with n and fall in the seller’s capacity, so if buyers have significant bargaining power, then the seller will strategically constrain capacity to less than n. Thus, despite the efficiency of the bargaining solution, certain distributions of bargaining powers give rise to an allocative inefficiency.

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File URL: http://www.krannert.purdue.edu/programs/phd/Working-paper-series/Year-2006/1190.pdf
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Publisher Info
Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1190.

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Length: 26 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:pur:prukra:1190

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Web page: http://www.krannert.purdue.edu/programs/phd
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Related research
Keywords: Commitment ; Inefficiency ; Peripheral players ; Price heterogeneity ; Strategic bargaining;

Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D20 - Microeconomics - - Production and Organizations - - - General

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References listed on IDEAS
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.:
  1. Rubinstein, Ariel & Wolinsky, Asher, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Blackwell Publishing, vol. 57(1), pages 63-78, January. [Downloadable!] (restricted)
  2. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October. [Downloadable!] (restricted)
  3. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November. [Downloadable!] (restricted)
  4. Muthoo, Abhinay, 1996. "A Bargaining Model Based on the Commitment Tactic," Journal of Economic Theory, Elsevier, vol. 69(1), pages 134-152, April. [Downloadable!] (restricted)
    Other versions:
  5. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May. [Downloadable!] (restricted)
  6. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-97, June. [Downloadable!] (restricted)
  7. Camera, Gabriele & Selcuk, Cemil, 2004. "Price Dispersion with Directed Search," Purdue University Economics Working Papers 1173, Purdue University, Department of Economics. [Downloadable!]
  8. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  9. Calvo-Armengol, Antoni, 1999. "A note on three-player noncooperative bargaining with restricted pairwise meetings," Economics Letters, Elsevier, vol. 65(1), pages 47-54, October. [Downloadable!] (restricted)
  10. Guillermo Caruana & Liran Einav & Daniel Quint, 2004. "Multilateral Bargaining With Concession Costs," Working Papers wp2004_0415, CEMFI. [Downloadable!]
    Other versions:
  11. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Blackwell Publishing, vol. 63(3), pages 375-410, July. [Downloadable!] (restricted)
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