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Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining

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  • Matthew O. Jackson

    (California Institute of Technology)

  • Thomas R. Palfrey

    (California Institute of Technology)

Abstract

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.

Suggested Citation

  • Matthew O. Jackson & Thomas R. Palfrey, 1997. "Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining," Game Theory and Information 9711003, EconWPA.
  • Handle: RePEc:wpa:wuwpga:9711003
    Note: Type of Document - pdf; prepared on pc-latex; to print on postscript; pages: 38; figures: none. comments welcome
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jackson, Matthew O. & Palfrey, Thomas R., 2001. "Voluntary Implementation," Journal of Economic Theory, Elsevier, vol. 98(1), pages 1-25, May.
    2. Brusco, Sandro & Jackson, Matthew O., 1999. "The Optimal Design of a Market," Journal of Economic Theory, Elsevier, vol. 88(1), pages 1-39, September.
    3. Jackson, Matthew O. & Watts, Alison, 2010. "Social games: Matching and the play of finitely repeated games," Games and Economic Behavior, Elsevier, vol. 70(1), pages 170-191, September.
    4. Paul Healy, 2010. "Equilibrium participation in public goods allocations," Review of Economic Design, Springer;Society for Economic Design, vol. 14(1), pages 27-50, March.
    5. Matthew O. Jackson, 2001. "A crash course in implementation theory," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(4), pages 655-708.
    6. Amoros, Pablo, 2004. "Nash implementation and uncertain renegotiation," Games and Economic Behavior, Elsevier, vol. 49(2), pages 424-434, November.
    7. Raskovich, Alexander, 2007. "Ordered bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1126-1143, October.
    8. repec:eee:gamebe:v:104:y:2017:i:c:p:59-77 is not listed on IDEAS
    9. Calvo-Armengol, Antoni, 2003. "A decentralized market with trading links," Mathematical Social Sciences, Elsevier, vol. 45(1), pages 83-103, February.
    10. Moreno, Diego & Wooders, John, 2002. "Prices, Delay, and the Dynamics of Trade," Journal of Economic Theory, Elsevier, vol. 104(2), pages 304-339, June.
    11. Alexander Raskovich, 2006. "Ordered Bargaining," EAG Discussions Papers 200610, Department of Justice, Antitrust Division.
    12. Ettore Damiano & Hao Li & Wing Suen, 2005. "Unravelling of Dynamic Sorting," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1057-1076.
    13. Nadia Burani, 2008. "Matching, search and intermediation with two-sided heterogeneity," Review of Economic Design, Springer;Society for Economic Design, vol. 12(2), pages 75-117, June.
    14. Sjaak Hurkens & Nir Vulkan, 2015. "Dynamic matching and bargaining with heterogeneous deadlines," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(3), pages 599-629, August.

    More about this item

    Keywords

    implementation; bargaining; matching; search; individual rationality;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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