Competitive bargaining equilibrium

Julio Davila and J. Eeckhout

Journal of Economic Theory, 2008, vol. 139, issue 1, pages 269-294

Abstract: In a simple exchange economy we propose a bargaining procedure that leads to a Walrasian outcome as the agents become increasingly patient. The competitive outcome therefore obtains even if agents have market power and are not price-takers. Moreover, where in other bargaining protocols the final outcome depends on bargaining power or relative impatience, the outcome here is determinate and depends only on preferences and endowments. Our bargaining procedure involves bargaining over prices and maximum quantity constraints, and it guarantees convergence to a Walrasian outcome for any standard exchange economy. In contrast, without quantity constraints we show that equilibrium is generically inefficient.

Date: 2008
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Related works:
Working Paper: Competitive Bargaining Equilibria (2004)
Working Paper: Competitive Bargaining Equilibrium (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jetheo:v:139:y:2008:i:1:p:269-294

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