We examine a simple bargaining setting, where heterogeneous buyers and sellers are repeatedly matched with each other. We begin by characterizing efficiency in such a dynamic setting, and discuss how it differs from efficiency in a centralized static setting. We then study the allocations which can result in equilibrium when the matched buyers and sellers bargain through some extensive game form. We take an implementation approach, characterizing the possible allocation rules which result as the extensive game form is varied. We are particularly concerned with the impact of making trade voluntary: imposing individual rationality {\sl on and off} the equilibrium path. No buyer or seller consumates an agreement which leaves them worse off than the discounted expected value of their future rematching in the market. Finally, we compare and contrast the efficient allocations with those that could ever arise as the equlibria of some voluntary negotiation procedure.
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Length: 38 pages Date of creation: 25 Nov 1997 Date of revision: Handle: RePEc:wpa:wuwpga:9711003
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Find related papers by JEL classification: C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
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Saijo, T. & Tatamitani, Y. & Yamato, T., 1994.
"Toward Natural Implementation,"
Papers
340, Osaka - Institute of Social and Economic Research.
Other versions:
Saijo, Tatsuyoshi & Tatamitani, Yoshikatsu & Yamato, Takehiko, 1996.
"Toward Natural Implementation,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 949-80, November.
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[Downloadable!]
Kalai, Ehud & Ledyard, John, 1997.
"Repeated Implementation,"
Working Papers
1027, California Institute of Technology, Division of the Humanities and Social Sciences.
[Downloadable!]
Chakravorti, B. & Corchon, L.C., 1992.
"Credible Implementation,"
Papers
76, Bell Communications - Economic Research Group.
Other versions:
Luis Corchón & Bhaskar Chakravorti & Simon Wilkie, 1993.
"Credible Implementation,"
Working Papers. Serie AD
1993-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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Cited by: (explanations, 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.)
Matthew O. Jackson & Sandro Brusco, 1997.
"The Optimal Design of a Market,"
Discussion Papers
1186, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]