TY - JOUR
T1 - Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium
AU - Coles, Melvyn G.
AU - Muthoo, Abhinay
N1 - Funding Information:
follows that: limN_coGN(x)=limN_coV(N,r/a+E,.)>V(N*+I,r/a+E,.)-V(N*+I,r/a,'), which is strictlypositive.ButthiscontradictslimN_coV(N,r/a+E,.)=o. II Acknowledgements. For helpful comments by the editors, Ian Jewitt and Hyun Song Shin, three anonymous referees, Kevin Roberts, Ken Binmore and the seminar participants at the London School of Economics, University of Cambridge, University College London and the Seventh World Congress of the Econometric Society, we are grateful. The first author gratefully acknowledges financial support from the Leverhulme trust and La Comision Interministerial de Ciencia y Tecnologia.
PY - 1998/4
Y1 - 1998/4
N2 - This paper extends the bargaining and matching literature, such as Rubinstein and Wolinsky (1985), by considering a new matching process. We assume that a central information agency exists, such as real estate agencies in the housing market and employment agencies (or newspapers) in the labour market, which puts traders into direct contact with each other. With heterogeneity of trader preferences, equilibrium trade is characterized by existing traders on each side of the market trying to match with the flow of new traders on the other side (since existing traders have already sampled and rejected each other). Two procedures of trade co-exist, namely a strategic bilateral bargaining process and a competitive bidding process, depending on the number of potential matches a new trader obtains. We characterize the unique symmetric Markov perfect equilibrium to this stochastic trading game.
AB - This paper extends the bargaining and matching literature, such as Rubinstein and Wolinsky (1985), by considering a new matching process. We assume that a central information agency exists, such as real estate agencies in the housing market and employment agencies (or newspapers) in the labour market, which puts traders into direct contact with each other. With heterogeneity of trader preferences, equilibrium trade is characterized by existing traders on each side of the market trying to match with the flow of new traders on the other side (since existing traders have already sampled and rejected each other). Two procedures of trade co-exist, namely a strategic bilateral bargaining process and a competitive bidding process, depending on the number of potential matches a new trader obtains. We characterize the unique symmetric Markov perfect equilibrium to this stochastic trading game.
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U2 - 10.1111/1467-937X.00043
DO - 10.1111/1467-937X.00043
M3 - Article
AN - SCOPUS:0039998108
SN - 0034-6527
VL - 65
SP - 235
EP - 260
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 2
ER -