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Dynamic Multilateral Markets

  • Arnold Polanski

    (University of East Anglia)

  • Emiliya A. Lazarova

    (University of Birmingham)

We study dynamic multilateral markets, in which players' payoffs result from coalitional bargaining. We establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as market frictions vanish. We further apply this methodology to the analysis of labor markets. From our general results, we can determine the endogenous composition of the equilibrium firm and the remuneration scheme.

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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 039.

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Date of creation: Mar 2013
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Handle: RePEc:uea:aepppr:2012_39
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  1. Yashiv, Eran, 2007. "Labor Search and Matching in Macroeconomics," IZA Discussion Papers 2743, Institute for the Study of Labor (IZA).
  2. Alain Delacroix, 2003. "Heterogeneous Matching with Transferable Utility: Two Labor Market Applications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 313-330, February.
  3. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
  4. Siedlarek, Jan-Peter, 2015. "Intermediation in Networks," Working Paper 1518, Federal Reserve Bank of Cleveland.
  5. Darrell Duffie & Nicolae Garleanu & Lasse Heje Pedersen, 2004. "Over-the-Counter Markets," NBER Working Papers 10816, National Bureau of Economic Research, Inc.
  6. Kalyan Chatterjee & Hamid Sabourian, 1998. "Multiperson Bargaining and Strategic Complexity," CRIEFF Discussion Papers 9808, Centre for Research into Industry, Enterprise, Finance and the Firm.
  7. Eran Yashiv, 2007. "Labor search and matching in macroeconomics," LSE Research Online Documents on Economics 19707, London School of Economics and Political Science, LSE Library.
  8. K. G. Binmore & M. J. Herrero, 1988. "Matching and Bargaining in Dynamic Markets," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 17-31.
  9. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  10. Eran Yashiv, 2007. "Labor Search and Matching in Macroeconomics," CEP Discussion Papers dp0803, Centre for Economic Performance, LSE.
  11. Arnold Polanski & Fernando Vega-Redondo, 2013. "Markets, Bargaining, and Networks with Heterogeneous Agents," University of East Anglia Applied and Financial Economics Working Paper Series 038, School of Economics, University of East Anglia, Norwich, UK..
  12. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
  13. Huibin Yan, 2003. "Noncooperative selection of the core," International Journal of Game Theory, Springer;Game Theory Society, vol. 31(4), pages 527-540, 09.
  14. Okada, Akira, 2007. "Coalitional Bargaining Games with Random Proposers: Theory and Application," Discussion Papers 2007-10, Graduate School of Economics, Hitotsubashi University.
  15. Chen-Ying Huang, 2002. "Multilateral bargaining: conditional and unconditional offers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(2), pages 401-412.
  16. Mihai Manea, 2011. "Bargaining in Stationary Networks," American Economic Review, American Economic Association, vol. 101(5), pages 2042-80, August.
  17. Westermark, Andreas, 2003. "Bargaining, binding contracts, and competitive wages," Games and Economic Behavior, Elsevier, vol. 43(2), pages 296-311, May.
  18. Vijay Krishna & Roberto Serrano, 1996. "Multilateral Bargaining," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 61-80.
  19. Kalyan Chatterjee & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 463-477.
  20. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January.
  21. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
  22. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
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