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Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining

  • Matthew O. Jackson

    (California Institute of Technology)

  • Thomas R. Palfrey

    (California Institute of Technology)

We examine a simple bargaining setting, where heterogeneous buyers and sellers are repeatedly matched with each other. We begin by characterizing efficiency in such a dynamic setting, and discuss how it differs from efficiency in a centralized static setting. We then study the allocations which can result in equilibrium when the matched buyers and sellers bargain through some extensive game form. We take an implementation approach, characterizing the possible allocation rules which result as the extensive game form is varied. We are particularly concerned with the impact of making trade voluntary: imposing individual rationality {\sl on and off} the equilibrium path. No buyer or seller consumates an agreement which leaves them worse off than the discounted expected value of their future rematching in the market. Finally, we compare and contrast the efficient allocations with those that could ever arise as the equlibria of some voluntary negotiation procedure.

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File URL: http://econwpa.repec.org/eps/game/papers/9711/9711003.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 9711003.

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Length: 38 pages
Date of creation: 25 Nov 1997
Date of revision:
Handle: RePEc:wpa:wuwpga:9711003
Note: Type of Document - pdf; prepared on pc-latex; to print on postscript; pages: 38; figures: none. comments welcome
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May.
  2. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  3. Neil E. Gretsky & Joseph M. Ostroy & William R. Zame, 1990. "The Nonatomic Assignment Model," UCLA Economics Working Papers 605, UCLA Department of Economics.
  4. Saijo, Tatsuyoshi & Tatamitani, Yoshikatsu & Yamato, Takehiko, 1996. "Toward Natural Implementation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 949-80, November.
  5. Ariel Rubinstein & Asher Wolinsky, 1990. "Renegotiation-Proof Implementation and Time Preferences," STICERD - Theoretical Economics Paper Series 215, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  7. Jackson Matthew O. & Palfrey Thomas R. & Srivastava Sanjay, 1994. "Undominated Nash Implementation in Bounded Mechanisms," Games and Economic Behavior, Elsevier, vol. 6(3), pages 474-501, May.
  8. Kalai, Ehud & Ledyard, John, 1997. "Repeated Implementation," Working Papers 1027, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. Maskin, Eric & Sjostrom, Tomas, 2001. "Implementation Theory," Working Papers 5-01-1, Pennsylvania State University, Department of Economics.
  10. Baliga, S. & Corchon, L.C. & Sjostrom, T., 1995. "The Theory of Implemetation when the Planner is a PLayer," Cambridge Working Papers in Economics 9512, Faculty of Economics, University of Cambridge.
  11. Brusco, Sandro & Jackson, Matthew O., 1999. "The Optimal Design of a Market," Journal of Economic Theory, Elsevier, vol. 88(1), pages 1-39, September.
  12. Chakravorty, Bhaskar & Corchon, Luis C. & Wilkie, Simon, 2006. "Credible implementation," Games and Economic Behavior, Elsevier, vol. 57(1), pages 18-36, October.
  13. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  14. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
  15. Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
  16. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-82, March.
  17. Dale T. Mortensen, 1979. "The Matching Process as a Non-Cooperative/Bargaining Game," Discussion Papers 384, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  18. Sandeep Baliga & Tomas Sjostrom, 1996. "Interactive Implementation," Harvard Institute of Economic Research Working Papers 1751, Harvard - Institute of Economic Research.
  19. JoseHerrero, Maria & Srivastava, Sanjay, 1992. "Implementation via backward induction," Journal of Economic Theory, Elsevier, vol. 56(1), pages 70-88, February.
  20. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
  21. McLennan, Andrew & Sonnenschein, Hugo, 1991. "Sequential Bargaining as a Noncooperative Foundation for Walrasian Equilibrium," Econometrica, Econometric Society, vol. 59(5), pages 1395-1424, September.
  22. Ma, Ching-to & Moore, John & Turnbull, Stephen, 1988. "Stopping agents from "cheating"," Journal of Economic Theory, Elsevier, vol. 46(2), pages 355-372, December.
  23. Matthew 0. Jackson, 1989. "Implementation in Undominated Strategies - A Look at Bounded Mechanisms," Discussion Papers 833, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  24. Bhaskar Dutta & Arunava Sen & Rajiv Vohra, 1994. "Nash implementation through elementary mechanisms in economic environments," Review of Economic Design, Springer;Society for Economic Design, vol. 1(1), pages 173-203, December.
  25. Nabil Al-Najjar, 1996. "Aggregation and the Law of Large Numbers in Economies with a Continuum of Agents," Discussion Papers 1160, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  26. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
  27. Sakovics, J. & Ponsati, C., 1995. "Rubinstein Batgaining with Tow-Sided Options," UFAE and IAE Working Papers 318.95, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  28. Gale, Douglas M, 1986. "Bargaining and Competition Part II: Existence," Econometrica, Econometric Society, vol. 54(4), pages 807-18, July.
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