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Markov equilibria in dynamic matching and bargaining games

  • Gale, Douglas
  • Sabourian, Hamid

Rubinstein and Wolinsky (1990) show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov perfect equilibrium is competitive. By contrast, in the more general case of heterogeneous markets, we show there exists a continuum of (non-competitive) Markov perfect equilibria. However, a refinement of the Markov property, which we call monotonicity, does suffice to guarantee perfectly competitive behavior: we show that a Markov perfect equilibrium is competitive if and only if it is monotonic. The monotonicity property is closely related to the concept of Nash equilibrium with complexity costs.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 54 (2006)
Issue (Month): 2 (February)
Pages: 336-352

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Handle: RePEc:eee:gamebe:v:54:y:2006:i:2:p:336-352
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  1. Arial Rubinstein & Asher Wolinsky, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Levine's Working Paper Archive 622, David K. Levine.
  2. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  3. Binmore, Ken G & Herrero, M J, 1988. "Matching and Bargaining in Dynamic Markets," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 17-31, January.
  4. Masso, Jordi & Rosenthal, Robert W., 1989. "More on the "anti-folk theorem"," Journal of Mathematical Economics, Elsevier, vol. 18(3), pages 281-290, June.
  5. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
  6. McLennan, Andrew & Sonnenschein, Hugo, 1991. "Sequential Bargaining as a Noncooperative Foundation for Walrasian Equilibrium," Econometrica, Econometric Society, vol. 59(5), pages 1395-1424, September.
  7. Binmore, Ken G & Herrero, M J, 1988. "Security Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 33-48, January.
  8. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
  9. Gale, Douglas M, 1986. "Bargaining and Competition Part II: Existence," Econometrica, Econometric Society, vol. 54(4), pages 807-18, July.
  10. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
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