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Dynamic Matching and Bargaining: The Role of Deadlines

Nir Vulkan and Sjaak Hurkens

No 188, Working Papers from Barcelona School of Economics

Abstract: We consider a dynamic model where traders in each period are matched randomly into pairs who then bargain about the division of a fixed surplus. When agreement is reached the traders leave the market. Traders who do not come to an agreement return next period in which they will be matched again, as long as their deadline has not expired yet. New traders enter exogenously in each period. We assume that traders within a pair know each other's deadline. We define and characterize the stationary equilibrium configurations. Traders with longer deadlines fare better than traders with short deadlines. It is shown that the heterogeneity of deadlines may cause delay. It is then shown that a centralized mechanism that controls the matching protocol, but does not interfere with the bargaining, eliminates all delay. Even though this efficient centralized mechanism is not as good for traders with long deadlines, it is shown that in a model where all traders can choose which mechanism to use, no delay will be observed.

Keywords: bargaining; deadlines; markets (search for similar items in EconPapers)
JEL-codes: C73 C78 (search for similar items in EconPapers)
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Dynamic Matching and Bargaining: The Role of Deadlines (2006) Downloads
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