The Rate of Convergence to Perfect Competition of Matching and Bargaining Mechanisms

Artyom Shneyerov () and Adam Chi Leung Won

No 1467, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: We study the steady state of a market with incoming cohorts of buyers and sellers who are matched pairwise and bargain under private information. We first consider generalized random-proposer take-it-or-leave-it offer games (GRP TIOLI games). This class of games includes a simple random-proposer TIOLI game, but also many other interesting bargaining games. A friction parameter is tau, the length of the time period until the next meeting. We find that as tau (right arrow) 0, all market equilibria converge to the Walrasian limit, at the fastest possible rate Omicron (tau) among all bargaining mechanisms. Some important bargaining games not in this class may have non-convergent market equilibria. This is the case for the k-double auction: we find that there are equilibria that converge at a linear rate, those that converge at a slower rate or even not converge at all.

Keywords: Matching and Bargaining; Search; Double Auctions; Foundations for Perfect Competition; Rate of Convergence (search for similar items in EconPapers)
JEL-codes: C73 C78 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2008-08
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