Bargaining and efficiency in networks

Dilip Abreu, Mihai Manea

    Research output: Contribution to journalArticlepeer-review


    We study an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain over a unit surplus. Players who reach agreement are removed from the network without replacement. The global logic of efficient matchings and the local nature of bargaining, in combination with the irreversible exit of player pairs following agreements, create severe hurdles to the attainment of efficiency in equilibrium. For many networks all Markov perfect equilibria of the bargaining game are inefficient, even as players become patient. We investigate how incentives need to be structured in order to achieve efficiency via subgame perfect, but non-Markovian, equilibria. The analysis extends to an alternative model in which individual players are selected according to some probability distribution, and a chosen player can select a neighbor with whom to bargain.

    Original languageEnglish (US)
    Pages (from-to)43-70
    Number of pages28
    JournalJournal of Economic Theory
    Issue number1
    StatePublished - Jan 2012


    • Bargaining
    • Decentralized markets
    • Efficiency
    • Networks
    • Random matching
    • Stochastic games

    ASJC Scopus subject areas

    • Economics and Econometrics


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