On the possibility of efficient bilateral trade
Economic design , Volume 1 - Issue 1 p. 79- 102
I study a sequential process in which different pairs of traders bargain over the terms of trade of an indivisible good. I consider both one-sided and two-sided offers based bargaining at the stage-game level. The sequential process is modelled as an infinite stage-game of incomplete information and the paper studies the efficiency properties of its equilibria. It is shown: With one-sided offers, all equilibria are long-run ex post efficient; with two-sided offers, examples of equilibria are constructed with widely varying efficiency properties.
|Bilateral bargaining, C78, D82, D83, Ex post efficiency, Learning|
|Organisation||Erasmus School of Economics|
Goyal, S. (1994). On the possibility of efficient bilateral trade. Economic design, 1(1), 79–102. doi:10.1007/BF02716615