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Bilateral Trading in Networks

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  • Condorelli, D
  • Galeotti, A

Abstract

We study an incomplete-information model of sequential bargaining for a single object, with the novel feature that agents are located in a network. In each round of trade, the current owner of the object either consumes it or makes a take-it-or-leave-it offer to some connected trader. Traders may buy in order to consume or to resale to others. We show that the equilibrium price dynamics is non-monotone and that traders that intermediate the object arise endogenously and attain a pro t. We also provide insights on how traders' equilibrium payoffs depend on their location in the network.

Suggested Citation

  • Condorelli, D & Galeotti, A, 2012. "Bilateral Trading in Networks," Economics Discussion Papers 2872, University of Essex, Department of Economics.
  • Handle: RePEc:esx:essedp:2872
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    References listed on IDEAS

    as
    1. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November.
    2. Haile, Philip A., 2003. "Auctions with private uncertainty and resale opportunities," Journal of Economic Theory, Elsevier, vol. 108(1), pages 72-110, January.
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    Cited by:

    1. Nava, Francesco, 2015. "Efficiency in decentralized oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 157(C), pages 315-348.
    2. Dan LI & Norman SCHUERHOFF, "undated". "Dealer Networks," Swiss Finance Institute Research Paper Series 14-50, Swiss Finance Institute.
    3. Jackson, Matthew O. & Rogers, Brian & Zenou, Yves, 2016. "Networks: An economic perspective," CEPR Discussion Papers 11452, C.E.P.R. Discussion Papers.
    4. Iaryczower, Matias & Oliveros, Santiago, 2016. "Power brokers: Middlemen in legislative bargaining," Journal of Economic Theory, Elsevier, vol. 162(C), pages 209-236.
    5. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," CORE Discussion Papers 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Syngjoo Choi & Andrea Galeotti & Sanjeev Goyal, 2017. "Trading in Networks: Theory and Experiments," Journal of the European Economic Association, European Economic Association, vol. 15(4), pages 784-817.
    7. Kotowski, Maciej H. & Leister, C. Matthew, 2018. "Trading Networks and Equilibrium Intermediation," Working Paper Series rwp18-001, Harvard University, John F. Kennedy School of Government.
    8. Jackson, Matthew O. & Zenou, Yves, 2012. "Games on Networks," CEPR Discussion Papers 9127, C.E.P.R. Discussion Papers.
    9. repec:hrv:hksfac:35165081 is not listed on IDEAS
    10. Syngjoo Choi & Edoardo Gallo & Shachar Kariv, 2015. "Networks in the laboratory," Cambridge Working Papers in Economics 1551, Faculty of Economics, University of Cambridge.
    11. repec:aea:aecrev:v:107:y:2017:i:11:p:3320-62 is not listed on IDEAS
    12. Jan-Peter Siedlarek, 2012. "Intermediation in Networks," Working Papers 2012.42, Fondazione Eni Enrico Mattei.
    13. Alison Watts, 2016. "Auctions Versus Private Negotiations in Buyer-Seller Networks," Games, MDPI, Open Access Journal, vol. 7(3), pages 1-14, August.
    14. Goyal, S., 2016. "Networks and Markets," Cambridge Working Papers in Economics 1652, Faculty of Economics, University of Cambridge.
    15. Daniele Condorelli & Andrea Galeotti & Vasiliki Skreta, 2013. "Selling Through Referrals," Working Papers 13-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    16. Babus, Ana & Hu, Tai-Wei, 2017. "Endogenous intermediation in over-the-counter markets," Journal of Financial Economics, Elsevier, vol. 125(1), pages 200-215.
    17. Havran, Dániel & Erb, Tamás, 2015. "Mit veszítünk a piaci súrlódásokkal?. A pénzügyi piacok mikrostruktúrája
      [Trading mechanisms and market frictions. Microstructure of the financial markets]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 229-262.

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