IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Markets, Bargaining, and Networks with Heterogeneous Agents

  • Arnold Polanski

    (University of East Anglia)

  • Fernando Vega-Redondo

    (European University Institute)

Registered author(s):

    The paper proposes an intertemporal model of bargaining among heterogeneous buyers and sellers placed on a bipartite network. First, it characterizes conditions on the network under which its trading restrictions are inessential and the outcome is arbitrage-free. Instead, when the system is segmented in different trading components, we show how these come about and how prices are determined in each of them. Second, we turn to the issue of network endogeneity, focusing on those networks that are Pairwise Stable. Such networks are shown to always exist and be arbitrage-free. In the latter respect, therefore, they satisfy one of the key properties displayed by frictionless markets. We identify, however, a sharp contrast regarding another key feature: Pairwise-Stable networks are generically inefficient if the matching process is genuinely decentralized. This uncovers a fundamental incompatibility between individual incentives and social welfare in endogenous trading networks. We explain that such incompatibility is not only due to buyer/seller heterogeneity but is also caused by the incentives underlying network formation in a trading context.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.uea.ac.uk/menu/depts/eco/research/RePEc/uea/papers_pdf/UEA-AFE-038.pdf
    Download Restriction: no

    Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia Applied and Financial Economics Working Paper Series with number 038.

    as
    in new window

    Length:
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:uea:aepppr:2012_38
    Contact details of provider: Postal: Norwich NR4 7TI
    Phone: 44 1603 591131
    Fax: +44(0)1603 4562592
    Web page: http://www.uea.ac.uk/eco/

    More information through EDIRC

    Order Information: Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
    Email:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Polanski, Arnold, 2007. "Bilateral bargaining in networks," Journal of Economic Theory, Elsevier, vol. 134(1), pages 557-565, May.
    2. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September.
    3. Matthew O. Jackson & Asher Wolinsky, 1995. "A Strategic Model of Social and Economic Networks," Discussion Papers 1098R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Serrano, Roberto, 2002. "Decentralized information and the Walrasian outcome: a pairwise meetings market with private values," Journal of Mathematical Economics, Elsevier, vol. 38(1-2), pages 65-89, September.
    5. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
    6. Shneyerov, Art & Wong, Adam Chi Leung, 2007. "Bilateral Matching and Bargaining with Private Information," Microeconomics.ca working papers shneyerov-07-05-01-03-38-, Vancouver School of Economics, revised 01 May 2007.
    7. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
    8. 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.
    9. Arnold Polanski & Emiliya A. Lazarova, 2013. "Dynamic Multilateral Markets," University of East Anglia Applied and Financial Economics Working Paper Series 039, School of Economics, University of East Anglia, Norwich, UK..
    10. Lauermann, Stephan, 2012. "Asymmetric information in bilateral trade and in markets: An inversion result," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1969-1997.
    11. Rubinstein, Ariel & Wolinsky, Asher, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 63-78, January.
    12. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-80, August.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:uea:aepppr:2012_38. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alasdair Brown)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.