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Markov equilibria in a model of bargaining in networks

  • Abreu, Dilip
  • Manea, Mihai

We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

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

Volume (Year): 75 (2012)
Issue (Month): 1 ()
Pages: 1-16

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Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:1-16
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  1. Rubinstein, Ariel & Wolinsky, Asher, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 63-78, January.
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  8. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
  9. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  10. Polanski, Arnold, 2007. "Bilateral bargaining in networks," Journal of Economic Theory, Elsevier, vol. 134(1), pages 557-565, May.
  11. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-80, August.
  12. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
  13. Rachel E. Kranton & Deborah F. Minehart, 2001. "A Theory of Buyer-Seller Networks," American Economic Review, American Economic Association, vol. 91(3), pages 485-508, June.
  14. Polanski Arnold & Winter Eyal, 2010. "Endogenous Two-Sided Markets with Repeated Transactions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-27, March.
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