Bilateral Matching and Latin Squares
AbstractWe 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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Bibliographic InfoPaper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1190.
Length: 26 pages
Date of creation: Jul 2006
Date of revision:
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-28 (All new papers)
- NEP-COM-2006-07-28 (Industrial Competition)
- NEP-GTH-2006-07-28 (Game Theory)
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