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Dynamic Matching and Bargaining: The Role of Deadlines

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Abstract

We consider a dynamic model where traders in each period are matched randomly into pairs who then bargain about the division of a fixed surplus. When agreement is reached the traders leave the market. Traders who do not come to an agreement return next period in which they will be matched again, as long as their deadline has not expired yet. New traders enter exogenously in each period. We assume that traders within a pair know each other's deadline. We define and characterize the stationary equilibrium configurations. Traders with longer deadlines fare better than traders with short deadlines. It is shown that the heterogeneity of deadlines may cause delay. It is then shown that a centralized mechanism that controls the matching protocol, but does not interfere with the bargaining, eliminates all delay. Even though this efficient centralized mechanism is not as good for traders with long deadlines, it is shown that in a model where all traders can choose which mechanism to

Suggested Citation

  • Sjaak Hurkens & Nir Vulkan, 2006. "Dynamic Matching and Bargaining: The Role of Deadlines," UFAE and IAE Working Papers 660.06, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 19 Apr 2006.
  • Handle: RePEc:aub:autbar:660.06
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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.
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    3. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    4. Ponsati, Clara, 1995. "The deadline effect: A theoretical note," Economics Letters, Elsevier, vol. 48(3-4), pages 281-285, June.
    5. Sakovics Jozsef, 1993. "Delay in Bargaining Games with Complete Information," Journal of Economic Theory, Elsevier, vol. 59(1), pages 78-95, February.
    6. Larry Samuelson, 1992. "Disagreement in Markets with Matching and Bargaining," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 177-185.
    7. Gale,Douglas, 2000. "Strategic Foundations of General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521644105, March.
    8. Samuelson, L., 1988. "Disagreement In Markets With Matching And Bargaining," Papers 9-86-1, Pennsylvania State - Department of Economics.
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    11. Satterthwaite, Mark & Shneyerov, Artyom, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Microeconomics.ca working papers shneyerov-03-12-17-09-36-, Vancouver School of Economics, revised 17 Dec 2003.
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    13. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
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    Cited by:

    1. Sjaak Hurkens & Nir Vulkan, 2015. "Dynamic matching and bargaining with heterogeneous deadlines," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(3), pages 599-629, August.

    More about this item

    Keywords

    Bargaining; Deadlines; Markets;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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