Dynamic Multilateral Markets
Arnold Polanski and
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Arnold Polanski: University of East Anglia
No 39, University of East Anglia Applied and Financial Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.
We study dynamic multilateral markets, in which players' payoffs result from coalitional bargaining. We establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as market frictions vanish. We further apply this methodology to the analysis of labor markets. From our general results, we can determine the endogenous composition of the equilibrium firm and the remuneration scheme.
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Journal Article: Dynamic multilateral markets (2015)
Working Paper: Dynamic Multilateral Markets (2011)
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