Decentralized Trade with Bargaining and Voluntary Matching
Rubinstein and Wolinsky (1990) study a market with one seller, two buyers, and voluntary matching. Both the competitive outcome p[subscript c] and the bilateral bargaining outcome p[subscript b] are possible in subgame perfect equilibrium. We consider two variations. First, if there is a cost larger that p[subscript c]-p[subscript b] to the seller of changing partner, p[subscript b] is the unique outcome, otherwise no restriction expires. In the second variation the seller makes an Epsilon-binding preannouncement of whether he will change buyers after disagreement. If Epsilon is small there are equilibrium prices close to p[subscript b]. But for any Epsilon, if the discount factor is close to 1, the unique equilibrium price is p[subscript c].
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|Date of creation:||Sep 1993|
|Date of revision:|
|Publication status:||Published in: Economic Design, 1994, 1(1) pp 55-77|
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- Rubinstein, Ariel & Wolinsky, Asher, 1985.
"Equilibrium in a Market with Sequential Bargaining,"
Econometric Society, vol. 53(5), pages 1133-50, September.
- Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
- Hendon, Ebbs & Tranaes, Torben, 1991.
"Sequential bargaining in a market with one seller and two different buyers,"
Games and Economic Behavior,
Elsevier, vol. 3(4), pages 453-466, November.
- Ebbe Groes & Torben Tranæs, 1989. "Sequential Bargaining in a Market with One Seller and Two Different Buyers," Discussion Papers 89-22, University of Copenhagen. Department of Economics.
- Rubinstein, Ariel, 1982.
"Perfect Equilibrium in a Bargaining Model,"
Econometric Society, vol. 50(1), pages 97-109, January.
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