Markov equilibria in a model of bargaining in networks

Dilip Abreu, Mihai Manea

Research output: Contribution to journalArticle

15 Scopus citations

Abstract

We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

Original languageEnglish (US)
Pages (from-to)1-16
Number of pages16
JournalGames and Economic Behavior
Volume75
Issue number1
DOIs
StatePublished - May 1 2012

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Bargaining
  • Decentralized markets
  • Equilibrium existence
  • Inefficiency
  • Markov perfect equilibrium
  • Networks
  • Random matching

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