Markov equilibria in dynamic matching and bargaining games

Douglas Gale; Hamid Sabourian

doi:10.1016/j.geb.2004.11.004

Markov equilibria in dynamic matching and bargaining games

Douglas Gale, Hamid Sabourian

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

Abstract

Rubinstein and Wolinsky [Rev. Econ. Stud. 57 (1990) 63] show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov-perfect equilibrium of this model is competitive. By contrast, in the more general case of heterogeneous markets, even the Markov property is not enough to guarantee the perfectly competitive outcome. We define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of (non-competitive) Markov-perfect equilibria, with and without discounting. Unlike the homogeneous case, these equilibria allow for inefficient trades and for trade at non-uniform prices. The non-competitive equilibrium may be unique.

Original language	English (US)
Pages (from-to)	336-352
Number of pages	17
Journal	Games and Economic Behavior
Volume	54
Issue number	2
DOIs	https://doi.org/10.1016/j.geb.2004.11.004
State	Published - Feb 2006

Keywords

Bargaining
Competition
Markov-perfect equilibrium
Random matching

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.geb.2004.11.004

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title = "Markov equilibria in dynamic matching and bargaining games",

abstract = "Rubinstein and Wolinsky [Rev. Econ. Stud. 57 (1990) 63] show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov-perfect equilibrium of this model is competitive. By contrast, in the more general case of heterogeneous markets, even the Markov property is not enough to guarantee the perfectly competitive outcome. We define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of (non-competitive) Markov-perfect equilibria, with and without discounting. Unlike the homogeneous case, these equilibria allow for inefficient trades and for trade at non-uniform prices. The non-competitive equilibrium may be unique.",

keywords = "Bargaining, Competition, Markov-perfect equilibrium, Random matching",

author = "Douglas Gale and Hamid Sabourian",

note = "Funding Information: Earlier versions of this paper were presented at the London School of Economics, the University of Edinburgh, the Pennsylvania State University, the University of Pennsylvania, Brown University, University of Toronto, University College London, Cornell University, the Institute for Advanced Studies at Princeton, Northwestern University, Cambridge University, the Sabanci University in Istanbul and the Second World Congress of the Game Theory Society in Marseille. We would like to thank the many seminar participants, for their helpful comments, and the editor and referees of this journal, for their constructive criticism and valuable advice. The financial support of the National Science Foundation through Grant No. SES-0095109 and the C.V. Starr Center for Applied Economics at NYU is gratefully acknowledged.",

year = "2006",

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doi = "10.1016/j.geb.2004.11.004",

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AU - Gale, Douglas

AU - Sabourian, Hamid

N1 - Funding Information: Earlier versions of this paper were presented at the London School of Economics, the University of Edinburgh, the Pennsylvania State University, the University of Pennsylvania, Brown University, University of Toronto, University College London, Cornell University, the Institute for Advanced Studies at Princeton, Northwestern University, Cambridge University, the Sabanci University in Istanbul and the Second World Congress of the Game Theory Society in Marseille. We would like to thank the many seminar participants, for their helpful comments, and the editor and referees of this journal, for their constructive criticism and valuable advice. The financial support of the National Science Foundation through Grant No. SES-0095109 and the C.V. Starr Center for Applied Economics at NYU is gratefully acknowledged.

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N2 - Rubinstein and Wolinsky [Rev. Econ. Stud. 57 (1990) 63] show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov-perfect equilibrium of this model is competitive. By contrast, in the more general case of heterogeneous markets, even the Markov property is not enough to guarantee the perfectly competitive outcome. We define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of (non-competitive) Markov-perfect equilibria, with and without discounting. Unlike the homogeneous case, these equilibria allow for inefficient trades and for trade at non-uniform prices. The non-competitive equilibrium may be unique.

AB - Rubinstein and Wolinsky [Rev. Econ. Stud. 57 (1990) 63] show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov-perfect equilibrium of this model is competitive. By contrast, in the more general case of heterogeneous markets, even the Markov property is not enough to guarantee the perfectly competitive outcome. We define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of (non-competitive) Markov-perfect equilibria, with and without discounting. Unlike the homogeneous case, these equilibria allow for inefficient trades and for trade at non-uniform prices. The non-competitive equilibrium may be unique.

KW - Bargaining

KW - Competition

KW - Markov-perfect equilibrium

KW - Random matching

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JF - Games and Economic Behavior

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Markov equilibria in dynamic matching and bargaining games

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Keywords

ASJC Scopus subject areas

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