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.

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doi.org/10.1007/BF02716615, hdl.handle.net/1765/15226
Economic design
Erasmus School of Economics

Goyal, S. (1994). On the possibility of efficient bilateral trade. Economic design, 1(1), 79–102. doi:10.1007/BF02716615