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Bilateral Matching and Bargaining with Private Information

  • Shneyerov, Art
  • Wong, Adam Chi Leung

We explore the role of private information in bilateral matching and bargaining. Our model is a replica of Mortensen and Wright (2002), but with private information. A simple necessary and sufficient condition on the parameters of the model for existence of equilibrium with entry is obtained. As in Mortensen and Wright (2002), we find that equilibrium is unique and has the property that every meeting results in trade when the discount rate is sufficiently small. There are also equilibria in which not every meeting results in trade. All equilibria converge to perfect competition as the frictions of search costs and discounting are removed. We find that private information may deter entry. Because of matching externalities, this entry-deterring effect of private information may be welfare-enhancing.

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Paper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number shneyerov-07-05-01-03-38-04.

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Length: 42 pages
Date of creation: 01 May 2007
Date of revision: 01 May 2007
Handle: RePEc:ubc:pmicro:shneyerov-07-05-01-03-38-04
Contact details of provider: Web page: http://www.economics.ubc.ca/

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  1. Stephan Lauermann, 2013. "Dynamic Matching and Bargaining Games: A General Approach," American Economic Review, American Economic Association, vol. 103(2), pages 663-89, April.
  2. Alp E. Atakan, 2006. "Competitive Equilibria in Decentralized Matching with Incomplete Information," Discussion Papers 1437, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Artyom Shneyerov & Adam Chi Leung Won, 2008. "The Rate of Convergence to Perfect Competition of Matching and Bargaining Mechanisms," Discussion Papers 1467, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Stephan Lauermann, 2008. "Price Setting in a Decentralized Market and the Competitive Outcome," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_06, Max Planck Institute for Research on Collective Goods.
  5. Gianni De Fraja & Jozsef Sakovics, 2004. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," ESE Discussion Papers 36, Edinburgh School of Economics, University of Edinburgh.
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  9. Mark Satterthwaite & Artyom Shneyerov, 2003. "Convergence of a Dynamic Matching and Bargaining Market with Two-sided Incomplete Information to Perfect Competition," Discussion Papers 1384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  17. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
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  19. Satterthwaite, Mark & Shneyerov, Artyom, 2008. "Convergence to perfect competition of a dynamic matching and bargaining market with two-sided incomplete information and exogenous exit rate," Games and Economic Behavior, Elsevier, vol. 63(2), pages 435-467, July.
  20. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
  21. Stephan Lauermann, 2008. "When Less Information is Good for Efficiency: Private Information in Bilateral Trade and in Markets," 2008 Meeting Papers 419, Society for Economic Dynamics.
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  25. Tymon Tatur, 2005. "On the Trade off Between Deficit and Inefficiency and the Double Auction with a Fixed Transaction Fee," Econometrica, Econometric Society, vol. 73(2), pages 517-570, 03.
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