This paper models trade as a non-coopertative, strategic game played at an infinite sequence of dates. A single, indivisible commodity is traded. Buyers and sellers have transferable utility and are characterized by their reservation utilities. They meet at random and "bargain" over the price at which a single unit of the good will be exchanged. Under a variety of circumstances it is shown that as the costs of search and bargaining become negligible, the outcome of the game converges to the competitve (flow) equilibrium, even when there is complete information.
ASJC Scopus subject areas
- Economics and Econometrics