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Sequential bargaining in a market with one seller and two different buyers

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  • Hendon, Ebbs
  • Tranaes, Torben

Abstract

A matching and bargaining model in a market with one seller and two buyers, differing only in their reservation price, is analyzed. No subgame perfect equilibrium exists for stationary strategies. The authors demonstrate the existence of inefficient equilibria in which the low buyer receives the good with large probability, even as friction becomes negligible. They investigate the relationship between the use of Nash and sequential bargaining. Nash bargaining seems applicable only when the sequential approach yields a unique stationary strategy subgame perfect equilibrium.
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Suggested Citation

  • Hendon, Ebbs & Tranaes, Torben, 1991. "Sequential bargaining in a market with one seller and two different buyers," Games and Economic Behavior, Elsevier, vol. 3(4), pages 453-466, November.
  • Handle: RePEc:eee:gamebe:v:3:y:1991:i:4:p:453-466
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    References listed on IDEAS

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    6. Fishburn, Peter C., 1983. "Transitive measurable utility," Journal of Economic Theory, Elsevier, vol. 31(2), pages 293-317, December.
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    Cited by:

    1. 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.
    2. Kalyan Chatterjee & Bhaskar Dutta, 2013. "Rubinstein Auctions: On Competition for Bargaining Partners," World Scientific Book Chapters,in: Bargaining in the Shadow of the Market Selected Papers on Bilateral and Multilateral Bargaining, chapter 3, pages 51-77 World Scientific Publishing Co. Pte. Ltd..
    3. Kalyan Chatterjee & Kaustav Das, 2015. "Decentralised bilateral trading, competition for bargaining partners and the “law of one price”," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(4), pages 949-991, November.
    4. Ebbe Hendon & Birgitte Sloth & Torben Tranæs, 1994. "Decentralized trade with bargaining and voluntary matching," Review of Economic Design, Springer;Society for Economic Design, vol. 1(1), pages 55-77, December.
    5. Björnerstedt, Jonas & Westermark, Andreas, 2009. "Stationary equilibria in bargaining with externalities," Games and Economic Behavior, Elsevier, vol. 65(2), pages 318-338, March.
    6. Chatterjee, Kalyan & Dutta, Bhaskar, 2006. "Markets with Bilateral Bargaining and Incomplete Information," The Warwick Economics Research Paper Series (TWERPS) 762, University of Warwick, Department of Economics.
    7. Kalyan Chatterjee & Kaustav Das, 2013. "Decentralised Bilateral Trading in a Market with Incomplete Information," Discussion Papers 1313, Exeter University, Department of Economics.
    8. Charles J. Thomas, 2012. "An Alternating-Offers Model of Multilateral Negotiations," Working Papers 12-31, Chapman University, Economic Science Institute.
    9. Sempere-Monerris, José J. & Vannetelbosch, Vincent J., 1997. "Bargaining with Externalities: Licensing of an Innovation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Harstad, Bård, 2016. "The market for conservation and other hostages," Journal of Economic Theory, Elsevier, vol. 166(C), pages 124-151.
    11. Montez, João, 2014. "One-to-many bargaining when pairwise agreements are non-renegotiable," Journal of Economic Theory, Elsevier, vol. 152(C), pages 249-265.
    12. Matteo Maria GALIZZI, 2006. "Gas thin markets:insights from bargaining and networks models," Departmental Working Papers 2006-12, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    13. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 293-304, May.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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