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

    1. 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).
    2. Jackson, Matthew O. & Zenou, Yves, 2012. "Games on Networks," CEPR Discussion Papers 9127, C.E.P.R. Discussion Papers.
    3. Li, Dan & Schurhoff, Norman, 2014. "Dealer Networks," Finance and Economics Discussion Series 2014-95, Board of Governors of the Federal Reserve System (U.S.).
    4. 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.
    5. Nava, Francesco, 2015. "Efficiency in decentralized oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 157(C), pages 315-348.
    6. Alison Watts, 2016. "Auctions Versus Private Negotiations in Buyer-Seller Networks," Games, MDPI, Open Access Journal, vol. 7(3), pages 1-14, August.
    7. Iaryczower, Matias & Oliveros, Santiago, 2016. "Power brokers: Middlemen in legislative bargaining," Journal of Economic Theory, Elsevier, vol. 162(C), pages 209-236.
    8. repec:eee:jfinec:v:125:y:2017:i:1:p:200-215 is not listed on IDEAS
    9. Jackson, Matthew O. & Rogers, Brian & Zenou, Yves, 2016. "Networks: An economic perspective," CEPR Discussion Papers 11452, C.E.P.R. Discussion Papers.
    10. Goyal, S., 2016. "Networks and Markets," Cambridge Working Papers in Economics 1652, Faculty of Economics, University of Cambridge.
    11. 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.
    12. repec:hrv:hksfac:35165081 is not listed on IDEAS
    13. repec:oup:jeurec:v:15:y:2017:i:4:p:784-817. is not listed on IDEAS
    14. repec:aea:aecrev:v:107:y:2017:i:11:p:3320-62 is not listed on IDEAS
    15. Jan-Peter Siedlarek, 2012. "Intermediation in Networks," Working Papers 2012.42, Fondazione Eni Enrico Mattei.
    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. 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.
    18. Syngjoo Choi & Edoardo Gallo & Shachar Kariv, 2015. "Networks in the laboratory," Cambridge Working Papers in Economics 1551, Faculty of Economics, University of Cambridge.
    19. Babus, Ana & Kondor, Peter, 2018. "Trading and information diffusion in OTC markets," LSE Research Online Documents on Economics 88050, London School of Economics and Political Science, LSE Library.
    20. repec:eee:gamebe:v:109:y:2018:i:c:p:565-581 is not listed on IDEAS
    21. Christoph Aymanns & Co-Pierre Georg & Benjamin Golub, 2017. "Illiquidity spirals in Coupled Over-The-Counter Markets," Working Papers on Finance 1810, University of St. Gallen, School of Finance.
    22. 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.

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