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Decentralised bilateral trading, competition for bargaining partners and the “law of one price”


  • Kalyan Chatterjee


  • Kaustav Das



This paper analyses a model of price formation in a market with a finite number of non-identical agents engaging in decentralised bilateral interactions. We focus mainly on equal numbers of buyers and sellers, though we discuss other cases. All characteristics of agents are assumed to be common knowledge. Buyers simultaneously make targeted offers, which sellers can accept or reject. Acceptance leads to a pair exiting and rejection leads to the next period. Offers can be public, private or “ex ante public”. As the discount factor goes to 1, the price in all transactions converges to the same value. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • 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.
  • Handle: RePEc:spr:jogath:v:44:y:2015:i:4:p:949-991 DOI: 10.1007/s00182-014-0461-7

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    References listed on IDEAS

    1. 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.
    2. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
    3. 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..
    4. Kalyan Chatterjee & Kaustav Das, 2013. "Decentralised Bilateral Trading in a Market with Incomplete Information," Discussion Papers 1313, Exeter University, Department of Economics.
    5. K. G. Binmore & M. J. Herrero, 1988. "Matching and Bargaining in Dynamic Markets," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 17-31.
    6. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
    7. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October.
    8. Baliga Sandeep & Serrano Roberto, 1995. "Multilateral Bargaining with Imperfect Information," Journal of Economic Theory, Elsevier, vol. 67(2), pages 578-589, December.
    9. Douglas Gale & Hamid Sabourian, 2005. "Complexity and Competition," Econometrica, Econometric Society, vol. 73(3), pages 739-769, May.
    10. Sabourian, Hamid, 2004. "Bargaining and markets: complexity and the competitive outcome," Journal of Economic Theory, Elsevier, vol. 116(2), pages 189-228, June.
    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.
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