Bargaining in a Network with Heterogeneous Buyers

Nakkaş, Alper

doi:10.2139/ssrn.1552781

Cited by 1 publication

(4 citation statements)

References 20 publications

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“…support trade). Hence, by virtue of Proposition 4, no additional link can affect the LBP (which, as indicated, equals the value p * given in (9)) and thus cannot affect payoffs either. This, in sum, implies that the absence of these links is consistent with pairwise stability.…”

mentioning

confidence: 89%

“…assume that it is PS. Then, we know from Proposition 6 that trade will be conducted at the same price p * , given in (9), that prevails in the complete network. The induced outcome will be in general inefficient (in fact, arbitrarily so), as stated in the following result.…”

Section: Pmentioning

confidence: 99%

“…Assume that sellers' costs and buyers' valuations are all distinct 9 and more than just one pair of agents in the economy could profitably trade. Then, every Pairwise-Stable network G * is inefficient.…”

Section: Pmentioning

confidence: 99%

“…For each of those two links, we want identify conditions on the set of binary variables {w i } H i=1 that characterize when they are consistent with being part of a PS network. Recall that any such network is arbitrage-free (Proposition 6) and therefore all buyers and sellers trade at the same price p * given in (9).…”

mentioning

confidence: 99%

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Markets, Bargaining, and Networks with Heterogeneous Agents

Polanski

Vega‐Redondo

2013

SSRN Journal

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The paper proposes an intertemporal model of bargaining among heterogeneous buyers and sellers placed on a bipartite network. First, it characterizes conditions on the network under which its trading restrictions are inessential and the outcome is arbitragefree. Instead, when the system is segmented in different trading components, we show how these come about and how prices are determined in each of them. Second, we turn to the issue of network endogeneity, focusing on those networks that are Pairwise Stable. Such networks are shown to always exist and be arbitrage-free. In the latter respect, therefore, they satisfy one of the key properties displayed by frictionless markets. We identify, however, a sharp contrast regarding another key feature: Pairwise-Stable networks are generically inefficient if the matching process is genuinely decentralized. This uncovers a fundamental incompatibility between individual incentives and social welfare in endogenous trading networks. We explain that such incompatibility is not only due to buyer/seller heterogeneity but is also caused by the incentives underlying network formation in a trading context.

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mentioning

confidence: 89%

Section: Pmentioning

confidence: 99%

Section: Pmentioning

confidence: 99%

mentioning

confidence: 99%

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