Dynamic multilateral markets

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Abstract

We study dynamic multilateral markets, in which players' payoffs result from intra-coalitional bargaining. The latter is modeled as the ultimatum game with exogenous (time-invariant) recognition probabilities and unanimity acceptance rule. Players in agreeing coalitions leave the market and are replaced by their replicas, which keeps the pool of market participants constant over time. In this infinite game, we establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as the market frictions vanish.
Original languageEnglish
Pages (from-to)815-833
Number of pages19
JournalInternational Journal of Game Theory
Volume44
Issue number4
Early online date29 Oct 2014
DOIs
Publication statusPublished - Nov 2015

Keywords

  • multilateral bargaining
  • dynamic markets
  • partitioning equilibrium
  • labor markets

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