Markov equilibria in a model of bargaining in networks

Dilip Abreu; Mihai Manea

doi:10.1016/j.geb.2011.09.004

Markov equilibria in a model of bargaining in networks

Dilip Abreu, Mihai Manea

Research output: Contribution to journal › Article › peer-review

Abstract

We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

Original language	English (US)
Pages (from-to)	1-16
Number of pages	16
Journal	Games and Economic Behavior
Volume	75
Issue number	1
DOIs	https://doi.org/10.1016/j.geb.2011.09.004
State	Published - May 2012

Keywords

Bargaining
Decentralized markets
Equilibrium existence
Inefficiency
Markov perfect equilibrium
Networks
Random matching

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.geb.2011.09.004

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AB - We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

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KW - Decentralized markets

KW - Equilibrium existence

KW - Inefficiency

KW - Markov perfect equilibrium

KW - Networks

KW - Random matching

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Markov equilibria in a model of bargaining in networks

Abstract

Keywords

ASJC Scopus subject areas

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