Abstract
I study a sequential process in which different pairs of traders bargain over the terms of trade of an indivisible good. I consider bothone-sided andtwo-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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This paper is based on Chapter 1 of my Ph.D thesis.
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Goyal, S. On the possibility of efficient bilateral trade. Economic Design 1, 79–102 (1994). https://doi.org/10.1007/BF02716615
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DOI: https://doi.org/10.1007/BF02716615