Bargaining and matching in small markets

John Wooders

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: The present paper focuses on markets where trade is carried out through matching and bargaining and where at each date t = 0,1, ... a finite and exogenously given number of agents enters. Such markets are "small" in the sense that whether a match ends with trade influences matching probabilities at subsequent dates. For a small market we show that as the market becomes large, the equilibrium of the small market converges to the equilibrium of a limit market with a continuum of agents. Nonetheless, for any small market there exists a matching process such that the equilibrium of the small market significantly differs from the equilibrium of the associated large market with a continuum of agents, although equilibrium-path matching probabilities are the same in both markets. Therefore, matching models with a continuum of agents are not always a good approximation of small markets.

Keywords: Matching; Bargaining; Market; equilibrium (search for similar items in EconPapers)
Date: 1994-08
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:2982

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