Fairness and competition in a bilateral matching market

Helmut Bester

Games and Economic Behavior, 2024, vol. 146, issue C, 121-136

Abstract: This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders' fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches the Walrasian competitive equilibrium, independently of the traders' inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining.

Keywords: Fairness; Ultimatum game; Matching market; Search costs; Competition (search for similar items in EconPapers)
JEL-codes: C78 D5 D6 D83 D9 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Fairness and Competition in a Bilateral Matching Market (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:146:y:2024:i:c:p:121-136

DOI: 10.1016/j.geb.2024.05.001

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