IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/vcontributions.4y2004i1n1.html
   My bibliography  Save this article

Search and Bargaining in Large Markets With Homogeneous Traders

Author

Listed:
  • Ponsati Clara

    (Institut d’Analisi Economica - CSIC, clara.ponsati@uab.es)

Abstract

We study decentralized trade in dynamic markets with homogeneous, non-atomic, buyers and sellers that wish to exchange one unit. In the first part of the paper we characterize equilibrium in a bargaining model with two-sided time varying outside options. In the second part we analyze a market equilibrium model in which (i) buyers and sellers are randomly matched in pairs; (ii) each buyer-seller pair bargains over the price of a good; and (iii) each agent has the option of abandoning negotiations, in which case the value of returning to the pool of unmatched agents constitutes an outside option. The second part is therefore an application of the first part in which the values of the outside options are endogenous to the model. Conditions for uniqueness of the market equilibrium are given; when it is unique it converges to the Walrasian outcome as frictions vanish. To the extent that multiplicity of market equilibria may (under some conditions) persist as frictions are removed, the limit of some sequences of equilibrium prices may converge to non-Walrasian values.

Suggested Citation

  • Ponsati Clara, 2004. "Search and Bargaining in Large Markets With Homogeneous Traders," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-27, February.
    • Handle: RePEc:bpj:bejtec:v:contributions.4:y:2004:i:1:n:1
    DOI: 10.2202/1534-5971.1099
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1534-5971.1099
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1534-5971.1099?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
    2. Gale,Douglas, 2000. "Strategic Foundations of General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521643306, September.
    3. Ariel Rubinstein & Asher Wolinsky, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 63-78.
    4. Clara Ponsatí & József Sákovics, 2001. "Randomly available outside options in bargaining," Spanish Economic Review, Springer;Spanish Economic Association, vol. 3(4), pages 231-252.
    5. Muthoo, Abhinay, 1993. "Sequential Bargaining and Competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 353-363, April.
    6. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
    7. JÕzsef SÂkovics & Clara PonsatÎ, 1998. "Rubinstein bargaining with two-sided outside options," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 667-672.
    8. Merlo, Antonio & Wilson, Charles A, 1995. "A Stochastic Model of Sequential Bargaining with Complete Information," Econometrica, Econometric Society, vol. 63(2), pages 371-399, March.
    9. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    10. Melvyn G. Coles & Abhinay Muthoo, 2000. "Bargaining Equilibrium in a Non-Stationary Environment," Econometric Society World Congress 2000 Contributed Papers 0472, Econometric Society.
    11. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
    12. Ponsati, C. & sakovics, J., 1996. "Bargaining in a changing Environment," UFAE and IAE Working Papers 351.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nadia Burani & Clara Ponsati, 2011. "Countervailing power? Collusion in markets with decentralized trade," Review of Economic Design, Springer;Society for Economic Design, vol. 15(2), pages 91-120, June.
    2. Annen, Kurt, 2006. "Social Capital in the Urban Informal Sector in Developing Countries – Micro Evidence from Small Textile Producers in Bolivia," Documentos de trabajo 3/2006, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roberto Serrano, 2007. "Bargaining," Working Papers 2007-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    2. Penta, Antonio, 2007. "Collective Bargaining and Walrasian Equilibrium," MPRA Paper 10260, University Library of Munich, Germany, revised Sep 2007.
    3. Penta, Antonio, 2011. "Multilateral bargaining and Walrasian equilibrium," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 417-424.
    4. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225, Elsevier.
    5. Mark Satterthwaite & Artyom Shneyerov, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Discussion Papers 1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Clara Ponsatí & József Sákovics, 2001. "Randomly available outside options in bargaining," Spanish Economic Review, Springer;Spanish Economic Association, vol. 3(4), pages 231-252.
    7. Art Shneyerov, 2006. "Dynamic Matching with Two-sided Incomplete Information and Participation Costs," Theory workshop papers 815595000000000009, UCLA Department of Economics.
    8. Stephan Lauermann, 2013. "Dynamic Matching and Bargaining Games: A General Approach," American Economic Review, American Economic Association, vol. 103(2), pages 663-689, April.
    9. Mark Satterthwaite & Artyom Shneyerov, 2007. "Dynamic Matching, Two-Sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Econometrica, Econometric Society, vol. 75(1), pages 155-200, January.
    10. Kazuya Kamiya & Takashi Shimizu, 2006. "A Dynamic General Equilibrium Model with Centralized Auction Markets," CIRJE F-Series CIRJE-F-417, CIRJE, Faculty of Economics, University of Tokyo.
    11. ISAAC, Tanguy, 2006. "Information revelation in markets with pairwise meetings: dynamic case with constant entry flow," LIDAM Discussion Papers CORE 2006048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Hamid Sabourian, 2000. "Bargaining and Markets: Complexity and the Walrasian Outcome," Cowles Foundation Discussion Papers 1249, Cowles Foundation for Research in Economics, Yale University.
    13. Max R. Blouin & Roberto Serrano, 2001. "A Decentralized Market with Common Values Uncertainty: Non-Steady States," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 323-346.
    14. Max Blouin, 2001. "Equilibrium in a Decentralized Market with Adverse Selection," Cahiers de recherche CREFE / CREFE Working Papers 128, CREFE, Université du Québec à Montréal, revised Mar 2001.
    15. Kalyan Chatterjee & Kaustav Das, 2013. "Decentralised Bilateral Trading in a Market with Incomplete Information," Discussion Papers 1313, University of Exeter, Department of Economics.
    16. Sjaak Hurkens & Nir Vulkan, 2015. "Dynamic matching and bargaining with heterogeneous deadlines," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(3), pages 599-629, August.
    17. Tanguy, ISAAC, 2006. "Information revelation in markets with pairwise meetings : dynamic case with constant entry flow," Discussion Papers (ECON - Département des Sciences Economiques) 2006026, Université catholique de Louvain, Département des Sciences Economiques.
    18. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
    19. Dipjyoti Majumdar & Artyom Shneyerov & Huan Xie, 2016. "An optimistic search equilibrium," Review of Economic Design, Springer;Society for Economic Design, vol. 20(2), pages 89-114, June.
    20. Miller, John H. & Tumminello, Michele, 2015. "Bazaar economics," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 163-181.

    More about this item

    Keywords

    Bargaining; Markets; Outside Options;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:contributions.4:y:2004:i:1:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.