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Bargaining and Delay in Trading Networks

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Mikel Bedayo & Ana Mauleon & Vincent Vannetelbosch, 2013. "Bargaining and Delay in Trading Networks," Working Papers 2013.01, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2013.01
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    References listed on IDEAS

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    Cited by:

    1. Rong, Rong & Houser, Daniel, 2015. "Growing stars: A laboratory analysis of network formation," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 380-394.
    2. in 't Veld, Daan & van der Leij, Marco & Hommes, Cars, 2020. "The formation of a core-periphery structure in heterogeneous financial networks," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
    3. Wang, Cindy Shin-Huei & Bauwens, Luc & Hsiao, Cheng, 2013. "Forecasting a long memory process subject to structural breaks," Journal of Econometrics, Elsevier, vol. 177(2), pages 171-184.
    4. NESTEROV, Yurii & NEMIROVSKI, Arkadi, 2012. "Finding the stationary states of Markov chains by iterative methods," LIDAM Discussion Papers CORE 2012058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    Keywords

    Bargaining; Trading networks; Private information;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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