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The Rate of Convergence to Perfect Competition of a Simple Matching and Bargaining Mechanism

Artyom Shneyerov () and Chi Leung Wong working papers from Vancouver School of Economics

Abstract: We study the steady-state of a market with inflowing cohorts of buyers and sellers who are randomly matched pairwise and bargain under private information. Two bargaining protocols are considered: take-it-or-leave-it offering and the double auction. There are frictions due to costly search and time discounting, parameterized by a single number t > 0 proportional to the waiting time until the next meeting. We study the efficiency of these mechanisms as the frictions are removed, i.e. t 0. We find that all equilibria of the take-it-or-leave-it offering mechanism converge to the Walrasian limit, at the fastest possible rate O(t) among all bargaining mechanisms. For the double auction mechanism, we find that there are equilibria that converge at the linear rate, those that converge at a slower rate or even not converge at all.

Keywords: Matching and Bargaining; Search; Double Auctions; Foundations for Perfect Competition; Rate of Convergence (search for similar items in EconPapers)
JEL-codes: C73 C78 D83 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2007-05-01, Revised 2007-05-01
New Economics Papers: this item is included in nep-gth
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