Skip to main content
SpringerLink
Log in

Sequential bargaining and competition

  • Research Articles
  • Published:
Economic Theory Aims and scope Submit manuscript

Summary

This paper studies a sequential bargaining model of a decentralised market. A main objective is to explore the conditions under which the unique subgame perfect equilibrium outcome of the market game approximates the Walrasian outcome of the market. The three main messages that emerge from our results are as follows. First, contrary to conventional wisdom, frictionless markets need not be Walrasian. Second, the relative magnitudes of frictions can have a profound impact on the market outcome even in the limit as the absolute magnitudes of the frictions become negligible. And third, the relative magnitudes of certain types of frictions may have to be significantly large in order for markets to be Walrasian, reflecting that certain types of frictions are needed in the market in order to induce the Walrasian outcome.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Binmore, K., Herrero, M.: Matching and bargaining in dynamic markets. Rev. Econ. Stud.55, 17–31 (1988)

    Google Scholar 

  • Gale, D.: Bargaining and competition, Parts I and II. Econometrica54, 785–818 (1986)

    Google Scholar 

  • Gale, D.: Limit theorems for markets with sequential bargaining. J. Econ. Theory43, 20–54 (1987)

    Google Scholar 

  • Osborne, M., Rubinstein, A.: Bargaining and markets. New York: Academic Press 1990

    Google Scholar 

  • Rubinstein, A.: Perfect equilibrium in a bargaining model. Econometrica50, 97–109 (1982)

    Google Scholar 

  • Rubinstein, A., Wolinsky, A.: Equilibrium in a market with sequential bargaining. Econometrica53, 1133–1150 (1985)

    Google Scholar 

  • Rubinstein, A., Wolinsky, A.: Decentralised trading, strategic bargaining and the Walrasian outcome. Rev. Econ. Stud.57, 63–78 (1990)

    Google Scholar 

  • Shaked, A., Sutton, J.: Involuntary unemployment as a perfect equilibrium in a bargaining model. Econometrica52, 1351–1364 (1984)

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, University of Essex, CO4 3SQ, Wivenhoe Park, Colchester, England, UK

    Abhinay Muthoo

Authors
  1. Abhinay Muthoo
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

This paper is based on a chapter of my Ph.D. thesis. I would like to thank Ken Binmore, David Canning, Partha Dasgupta and Frank Hahn for their helpful comments. I owe special thanks to Ariel Rubinstein for his comments, remarks and encouragement. The comments and suggestions of an anonymous referee have significantly improved the exposition at several places.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Muthoo, A. Sequential bargaining and competition. Econ Theory 3, 353–363 (1993). https://doi.org/10.1007/BF01212922

Download citation

  • Received:

  • Revised:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF01212922

Keywords

Search

Navigation