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Bilateral Matching and Latin Squares

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  • Camera, Gabriele
  • Selcuk, Cemil

Abstract

We study equilibrium prices and trade volume with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique sub-game perfect equilibrium exists. It is characterized by absence of costly bargaining delays and each trade is settled at a different price. Prices increase with n and fall in the seller s capacity, so if buyers have significant bargaining power, then the seller will strategically constrain capacity to less than n. Thus, despite the efficiency of the bargaining solution, certain distributions of bargaining powers give rise to an allocative inefficiency.

Suggested Citation

  • Camera, Gabriele & Selcuk, Cemil, 2006. "Bilateral Matching and Latin Squares," Purdue University Economics Working Papers 1190, Purdue University, Department of Economics.
    • Handle: RePEc:pur:prukra:1190
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    File URL: https://business.purdue.edu/research/Working-papers-series/2006/1190.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Commitment ; Inefficiency ; Peripheral players ; Price heterogeneity ; Strategic bargaining;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D20 - Microeconomics - - Production and Organizations - - - General

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