Dynamic multilateral markets

Arnold Polanski and Emiliya Lazarova

International Journal of Game Theory, 2015, vol. 44, issue 4, 815-833

Abstract: We study dynamic multilateral markets, in which players’ payoffs result from intra-coalitional bargaining. The latter is modeled as the ultimatum game with exogenous (time-invariant) recognition probabilities and unanimity acceptance rule. Players in agreeing coalitions leave the market and are replaced by their replicas, which keeps the pool of market participants constant over time. In this infinite game, we establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type’s equilibrium payoff as the market frictions vanish. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Multilateral bargaining; Dynamic markets; Partitioning equilibrium; Labor markets; C72; C78; J30 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Dynamic Multilateral Markets (2011)
Working Paper: Dynamic Multilateral Markets (2011)
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DOI: 10.1007/s00182-014-0455-5

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