Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining

Matthew Jackson and Thomas Palfrey

Game Theory and Information from University Library of Munich, Germany

Abstract: We examine a simple bargaining setting, where heterogeneous buyers and sellers are repeatedly matched with each other. We begin by characterizing efficiency in such a dynamic setting, and discuss how it differs from efficiency in a centralized static setting. We then study the allocations which can result in equilibrium when the matched buyers and sellers bargain through some extensive game form. We take an implementation approach, characterizing the possible allocation rules which result as the extensive game form is varied. We are particularly concerned with the impact of making trade voluntary: imposing individual rationality {\sl on and off} the equilibrium path. No buyer or seller consumates an agreement which leaves them worse off than the discounted expected value of their future rematching in the market. Finally, we compare and contrast the efficient allocations with those that could ever arise as the equlibria of some voluntary negotiation procedure.

Keywords: implementation; bargaining; matching; search; individual rationality (search for similar items in EconPapers)
JEL-codes: C72 C78 D71 D78 (search for similar items in EconPapers)
Pages: 38 pages
Date: 1997-11-25
Note: Type of Document - pdf; prepared on pc-latex; to print on postscript; pages: 38; figures: none. comments welcome
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9711003

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