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Bargaining and Delay in Trading Networks

Listed author(s):
  • Mikel Bedayo

    (CORE, University of Louvain, Belgium)

  • Ana Mauleon

    (CORE, University of Louvain and CEREC, University of Saint-Louis, Belgium)

  • Vincent Vannetelbosch

    (CORE, University of Louvain and CEREC, University of Saint-Louis, Belgium)

We study a model in which heterogeneous 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 Fondazione Eni Enrico Mattei in its series Working Papers with number 2013.01.

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Date of creation: Jan 2013
Handle: RePEc:fem:femwpa:2013.01
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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  2. Condorelli, Daniele & Galeotti, Andrea, 2012. "Bilateral Trading in Networks," Economics Discussion Papers 2872, University of Essex, Department of Economics.
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  4. Frank Page & Myrna Wooders, 2007. "Strategic Basins of Attraction, the Path Dominance Core, and Network Formation Games," Caepr Working Papers 2007-020, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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  8. Ana, MAULEON & José, SEMPERE-MONERRIS & Vincent, VANNETELBOSCH, 2005. "Networks of Manufacturers and Retailers," Discussion Papers (ECON - Département des Sciences Economiques) 2005036, Université catholique de Louvain, Département des Sciences Economiques.
  9. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Hojman, Daniel A. & Szeidl, Adam, 2008. "Core and periphery in networks," Journal of Economic Theory, Elsevier, vol. 139(1), pages 295-309, March.
  11. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
  12. Jean-Jacques, HERINGS & Ana, MAULEON & Vincent, VANNETELBOSCH, 2006. "Farsightedly stable networks," Discussion Papers (ECON - Département des Sciences Economiques) 2006046, Université catholique de Louvain, Département des Sciences Economiques.
  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. Abreu, Dilip & Manea, Mihai, 2012. "Bargaining and efficiency in networks," Journal of Economic Theory, Elsevier, vol. 147(1), pages 43-70.
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  16. Siedlarek, Jan-Peter, 2014. "Intermediation in Networks," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 471, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  17. Douglas M. Gale & Shachar Kariv, 2009. "Trading in Networks: A Normal Form Game Experiment," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 114-132, August.
  18. Joel Watson, 1998. "Alternating-Offer Bargaining with Two-Sided Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 573-594.
  19. Peter C. Cramton, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 205-225.
  20. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
  21. Condorelli, Daniele & Galeotti, Andrea, 2012. "Endogenous Trading Networks," Economics Discussion Papers 2871, University of Essex, Department of Economics.
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  27. Goyal, Sanjeev & Vega-Redondo, Fernando, 2007. "Structural holes in social networks," Journal of Economic Theory, Elsevier, vol. 137(1), pages 460-492, November.
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