Markov Equilibria of Dynamic Matching and Bargaining Games

Douglas Gale () and Hamid Sabourian

Working Papers from C.V. Starr Center for Applied Economics, New York University

Abstract: Rubinstein and Wolinsky (1990) show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov perfect equilibrium is competitive. By contrast, in the more general case of heterogeneous markets, we show there exists a continuum of (non-competitive) Markov perfect equilibria. However, a refinement of the Markov property, which we call monotonicity, does suffice to guarantee perfectly competitive behavior: we show that a Markov perfect equilibrium is competitive if and only if it is monotonic. The monotonicity property is closely related to the concept of Nash equilibrium with complexity costs.

New Economics Papers: this item is included in nep-ind
Date: 2002
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Related works:
Working Paper: Markov Equilibria in Dynamic Matching and Bargaining Games (2003)
Journal Article: Markov equilibria in dynamic matching and bargaining games (2006)
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