Sequential Bargaining in a Market with One Seller and Two Different Buyers

Ebbe Groes and Torben Tranaes ()
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Ebbe Groes: Institute of Economics, University of Copenhagen

No 89-22, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: A matching and bargaining model in a market with one seller and two buyers, differing only in their reservation price, is analyzed. No subgame perfect equilibrium exists for stationary strategies. The authors demonstrate the existence of inefficient equilibria in which the low buyer receives the good with large probability, even as friction becomes negligible. They investigate the relationship between the use of Nash and sequential bargaining. Nash bargaining seems applicable only when the sequential approach yields a unique stationary strategy subgame perfect equilibrium.

Keywords: game theory; bargaining theory; matching (search for similar items in EconPapers)
JEL-codes: C78 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1989-10
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Citations: View citations in EconPapers (5)

Published in: Games and Economic Behavior, 1991, 3(4) pp 453-66

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Journal Article: Sequential bargaining in a market with one seller and two different buyers (1991)
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