Bargaining and Delay in Trading Networks

37 Pages Posted: 2 Feb 2013

See all articles by Mikel Bedayo

Mikel Bedayo

Catholic University of Louvain (UCL)

Ana Mauleon

Université Saint-Louis - Bruxelles; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Vincent J. Vannetelbosch

Center for Operations Research and Econometrics (CORE)

Date Written: February 1, 2013

Abstract

We study a model in which heterogeneous agents first form a trading network where link formation is costless. Then, a seller and a buyer are randomly selected among the agents to bargain through a chain of intermediaries. We determine both the trading path and the allocation of the surplus among the seller, the buyer and the intermediaries at equilibrium. We show that a trading network is pairwise stable if and only if it is a core periphery network where the core consists of all weak (or impatient) agents who are linked to each other and the periphery consists of all strong (or patient) agents who have a single link towards a weak agent. Once agents do not know the impatience of the other agents, each bilateral bargaining session may involve delay, but not perpetual disagreement, in equilibrium. When an agent chooses another agent on a path from the buyer to the seller to negotiate bilaterally a partial agreement, her choice now depends both on the type of this other agent and on how much time the succeeding agents on the path will need to reach their partial agreements. We provide sufficient conditions such that core periphery networks are pairwise stable in presence of private information.

Keywords: bargaining, trading networks, private information

JEL Classification: C70, D60, J50

Suggested Citation

Bedayo, Mikel and Mauleon Echeverria, Ana Carmen and Vannetelbosch, Vincent J., Bargaining and Delay in Trading Networks (February 1, 2013). FEEM Working Paper No. 1.2013. Available at SSRN: https://ssrn.com/abstract=2210328 or http://dx.doi.org/10.2139/ssrn.2210328

Mikel Bedayo

Catholic University of Louvain (UCL) ( email )

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Ana Carmen Mauleon Echeverria

Université Saint-Louis - Bruxelles ( email )

Brussels, 1000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Vincent J. Vannetelbosch (Contact Author)

Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
1348 Louvain-la-Neuve, 1348
Belgium

Register to save articles to
your library

Register

Paper statistics

Downloads
36
Abstract Views
609
PlumX Metrics