Bargaining and markets.

*(English)*Zbl 0790.90023
Economic Theory, Econometrics, and Mathematical Economics. San Diego, CA: Academic Press, Inc.. xi, 216 p. (1990).

This book offers a detailed treatment of selected developments in bargaining theory. The focus of attention is on modelling bargaining as extensive games with a sequential structure in which time enters explicitly. Players make alternating offers and counter offers. Time discounting provides an incentive for reaching an agreement. The solution concept is that of (Selten’s) subgame perfect equilibrium. Under suitable assumptions there is an unique solution (Chapter 3).

This basic structure is used to investigate various models of decentralized trade in which the terms of trade between any two agents are determined by bilateral bargaining. Emphasis is on exploring the notion of a competitive equilibrium in that setting and the circumstances under which it is the appropriate solution concept in such markets. Agents are assumed to be randomly matched and their bargaining behaviour independent of agreements between other parties. In models where the number of traders in the market is steady over time, competitive equilibrium is not the appropriate solution (Chapter 7). It is so, however, in models where all traders enter the market at the same time and leave as agreements are concluded (Chapter 8). The role of trading procedures (Chapter 9) and informational assumptions (Chapter 10) are investigated.

While the aim is an exposition of strategic bargaining theory and its uses, Nash’s “axiomatic” theory (Chapter 2) and its close connections with the strategic theory (Chapter 4) is presented along with a preliminary pass at the study of markets using Nash’s approach (Chapter 6).

This basic structure is used to investigate various models of decentralized trade in which the terms of trade between any two agents are determined by bilateral bargaining. Emphasis is on exploring the notion of a competitive equilibrium in that setting and the circumstances under which it is the appropriate solution concept in such markets. Agents are assumed to be randomly matched and their bargaining behaviour independent of agreements between other parties. In models where the number of traders in the market is steady over time, competitive equilibrium is not the appropriate solution (Chapter 7). It is so, however, in models where all traders enter the market at the same time and leave as agreements are concluded (Chapter 8). The role of trading procedures (Chapter 9) and informational assumptions (Chapter 10) are investigated.

While the aim is an exposition of strategic bargaining theory and its uses, Nash’s “axiomatic” theory (Chapter 2) and its close connections with the strategic theory (Chapter 4) is presented along with a preliminary pass at the study of markets using Nash’s approach (Chapter 6).

Reviewer: S.Das Gupta (Halifax)

##### MSC:

91B26 | Auctions, bargaining, bidding and selling, and other market models |

91A40 | Other game-theoretic models |