Bilateral Matching and Latin Squares

Gabriele Camera and Cemil Selcuk

Purdue University Economics Working Papers from Purdue University, Department of Economics

Abstract: We study equilibrium prices and trade volume with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique sub-game perfect equilibrium exists. It is characterized by absence of costly bargaining delays and each trade is settled at a different price. Prices increase with n and fall in the seller s capacity, so if buyers have significant bargaining power, then the seller will strategically constrain capacity to less than n. Thus, despite the efficiency of the bargaining solution, certain distributions of bargaining powers give rise to an allocative inefficiency.

Keywords: Commitment; Inefficiency; Peripheral players; Price heterogeneity; Strategic bargaining (search for similar items in EconPapers)
JEL-codes: C78 D20 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-07
New Economics Papers: this item is included in nep-com and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:pur:prukra:1190

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