Decentralised bilateral trading, competition for bargaining partners and the "law of one price"
International Journal of Game Theory
Reason for embargo
Publisher embargo 12 months
This paper analyses a model of price formation in a market with a finite number of non-identical agents engaging in decentralised bilateral interactions. We focus mainly on equal numbers of buyers and sellers, though we discuss other cases. All characteristics of agents are assumed to be common knowledge. Buyers simultaneously make targeted offers, which sellers can accept or reject. Acceptance leads to a pair exiting and rejection leads to the next period. Offers can be public, private or “ex ante public”. As the discount factor goes to 1, the price in all transactions converges to the same value.
“The final publication is available at Springer via http://dx.doi.org/10.1007/s00182-014-0461-7”.
International Journal of Game Theory, 2015, Volume 44, Issue 4, pp.949-991