Bilateral Matching and Bargaining with Private Information
Chi Leung Wong and
No 1032, 2007 Meeting Papers from Society for Economic Dynamics
We study a steady state of the market with inflowing cohorts of buyers and sellers. The traders are randomly matched pairwise driven by a Pissarides-style matching function. Two bargaining protocols are considered: random offering and the k-double auction. There are frictions due to time discounting and costly participation. We derive a necessary and sufficient condition for existence of equilibrium with trade. Two types of equilibria are shown to exist: those in which each meeting results in a trade, and those in which some meetings do not. If the random-offering protocol is used, all equilibria converge at the linear rate to the Walrasian outcome as the frictions vanish. Under the k-double auction protocol, however, there also non-convergent equilibria.
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Journal Article: Bilateral matching and bargaining with private information (2010)
Working Paper: Bilateral Matching and Bargaining with Private Information (2007)
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