Markov equilibria in a model of bargaining in networks

Dilip Abreu, Mihai Manea

    Research output: Contribution to journalArticle

    Abstract

    We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

    Original languageEnglish (US)
    Pages (from-to)1-16
    Number of pages16
    JournalGames and Economic Behavior
    Volume75
    Issue number1
    DOIs
    StatePublished - May 1 2012

    Keywords

    • Bargaining
    • Decentralized markets
    • Equilibrium existence
    • Inefficiency
    • Markov perfect equilibrium
    • Networks
    • Random matching

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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