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Decentralized trade with bargaining and voluntary matching

Author

Listed:
  • Ebbe Hendon
  • Birgitte Sloth
  • Torben Tranæs

Abstract

Rubinstein and Wolinsky (1990) study a market with one seller, two buyers, and voluntary matching. Both the competitive outcome p[subscript c] and the bilateral bargaining outcome p[subscript b] are possible in subgame perfect equilibrium. We consider two variations. First, if there is a cost larger that p[subscript c]-p[subscript b] to the seller of changing partner, p[subscript b] is the unique outcome, otherwise no restriction expires. In the second variation the seller makes an Epsilon-binding preannouncement of whether he will change buyers after disagreement. If Epsilon is small there are equilibrium prices close to p[subscript b]. But for any Epsilon, if the discount factor is close to 1, the unique equilibrium price is p[subscript c].
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Suggested Citation

  • 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.
    • Handle: RePEc:spr:reecde:v:1:y:1994:i:1:p:55-77
    DOI: 10.1007/BF02716614
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. 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.
    3. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
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    Citations

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    Cited by:

    1. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
    2. Sempere-Monerris, José J. & Vannetelbosch, Vincent J., 1997. "Bargaining with Externalities: Licensing of an Innovation," LIDAM Discussion Papers IRES 1997007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Tranaes, Torben, 1998. "Tie-Breaking in Games of Perfect Information," Games and Economic Behavior, Elsevier, vol. 22(1), pages 148-161, January.
    4. Wooders, John, 1998. "Walrasian equilibrium in matching models," Mathematical Social Sciences, Elsevier, vol. 35(3), pages 245-259, May.
    5. 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.

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    More about this item

    Keywords

    Decentralized trade; Bargaining; Markets; Switching costs; Announcement; C78; D41;
    All these keywords.

    JEL classification:

    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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