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The provision of quality in a bilateral search market

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Abstract

We accomplish two goals. First, we provide a non-cooperative foundation for the use of the Nash bargaining solution in search markets. This finding should help to close the rift between the search and the matching-and-bargaining literature. Second, we establish that the diversity of quality offered (at an increasing price-quality ratio) in a decentralized market is an equilibrium phenomenon - even in the limit as search frictions disappear.

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  • Clara Ponsat?Author-Email: Clara.ponsati@uab.es & J?sef S?ovics, 2002. "The provision of quality in a bilateral search market," UFAE and IAE Working Papers 534.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:534.02
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    References listed on IDEAS

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    1. Wolinsky, Asher, 1987. "Matching, search, and bargaining," Journal of Economic Theory, Elsevier, vol. 42(2), pages 311-333, August.
    2. JÕzsef SÂkovics & Clara PonsatÎ, 1998. "Rubinstein bargaining with two-sided outside options," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 667-672.
    3. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
    4. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    5. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    6. Sakovics, J. & Ponsati, C., 1995. "Rubinstein Batgaining with Tow-Sided Options," UFAE and IAE Working Papers 318.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    7. Helmut Bester, 1988. "Bargaining, Search Costs and Equilibrium Price Distributions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(2), pages 201-214.
    8. John C. Harsanyi & Reinhard Selten, 1972. "A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information," Management Science, INFORMS, vol. 18(5-Part-2), pages 80-106, January.
    9. Bester, Helmut, 1993. "Bargaining versus Price Competition in Markets with Quality Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 278-288, March.
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    More about this item

    Keywords

    quality dispersion; Nash Program; bilateral search;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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