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Bargaining and delay in trading networks

  • BEDAYO, Mikel

    ()

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • MAULEON, Ana

    ()

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium and CEREC, University of Saint-Louis, B-1000 Brussels, Belgium)

  • VANNETELBOSCH, Vincent

    ()

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium and CEREC, University of Saint-Louis, B-1000 Brussels, Belgium)

We study a model in which heterogenous agents first form a trading network where link formation is costless. Then, a seller and a buyer are randomly selected among the agents to bargain through a chain of intermediaries. We determine both the trading path and the allocation of the surplus among the seller, the buyer and the intermediaries at equilibrium. We show that a trading network is pairwise stable if and only if it is a core periphery network where the core consists of all weak (or impatient) agents who are linked to each other and the periphery consists of all strong (or patient) agents who have a single link towards a weak agent. Once agents do not know the impatience of the other agents, each bilateral bargaining session may involve delay, but not perpetual disagreement, in equilibrium. When an agent chooses another agent on a path from the buyer to the seller to negotiate bilaterally a partial agreement, her choice now depends both on the type of this other agent and on how much time the succeeding agents on the path will need to reach their partial agreements. We provide sufficient conditions such that core periphery networks are pairwise stable in presence of private information.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012046.

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Date of creation: 10 Dec 2012
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Handle: RePEc:cor:louvco:2012046
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  1. MAULEON, Ana & SEMPERE MONERRIS, Jose J. & VANNETELBOSCH, Vincent J., . "Networks of manufacturers and retailers," CORE Discussion Papers RP 2291, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jan-Peter Siedlarek, 2012. "Intermediation in Networks," Working Papers 2012.42, Fondazione Eni Enrico Mattei.
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  5. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  6. Peter Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Papers of Peter Cramton 92res, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  7. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  8. Blume, Lawrence E. & Easley, David & Kleinberg, Jon & Tardos, Éva, 2009. "Trading networks with price-setting agents," Games and Economic Behavior, Elsevier, vol. 67(1), pages 36-50, September.
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  10. Condorelli, Daniele & Galeotti, Andrea, 2012. "Bilateral Trading in Networks," Economics Discussion Papers 2872, University of Essex, Department of Economics.
  11. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
  12. Herings P. Jean-Jacques & Mauleon Ana & Vannetelbosch Vincent, 2006. "Farsightedly Stable Networks," Research Memorandum 041, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  13. Sang-Chul Suh & Quan Wen, 2009. "A multi-agent bilateral bargaining model with endogenous protocol," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(2), pages 203-226, August.
  14. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    • Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
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  16. 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.
  17. Abreu, Dilip & Manea, Mihai, 2012. "Bargaining and efficiency in networks," Journal of Economic Theory, Elsevier, vol. 147(1), pages 43-70.
  18. Condorelli, Daniele & Galeotti, Andrea, 2012. "Endogenous Trading Networks," Economics Discussion Papers 2871, University of Essex, Department of Economics.
  19. Matthew O. Jackson, 2001. "Strongly Stable Networks," University of Oregon Economics Department Working Papers 2001-3, University of Oregon Economics Department, revised 15 Nov 2002.
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  21. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
  22. Joel Watson, 1998. "Alternating-Offer Bargaining with Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 573-594.
  23. Sanjeev Goyal, 2007. "Introduction to Connections: An Introduction to the Economics of Networks
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  24. Polanski, Arnold, 2007. "Bilateral bargaining in networks," Journal of Economic Theory, Elsevier, vol. 134(1), pages 557-565, May.
  25. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
  26. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-80, August.
  27. Shachar Kariv & Douglas Gale, 2007. "Trading in Networks: A Normal Form Game Experiment," Levine's Bibliography 843644000000000114, UCLA Department of Economics.
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