Bargaining Foundations for Price Taking in Matching Markets
Matthew Elliott and
Eduard Talamàs
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Abstract:
Agents make non-contractible investments before bargaining over who matches with whom and their terms of trade. When an agent is a price taker—in the sense that her investments do not change her potential partners’ payoffs—she has incentives to make socially-optimal investments. Across a variety of non-cooperative bargaining models featuring dynamic entry, we show that everyone necessarily becomes a price taker as bargaining frictions vanish if and only if there is a minimal amount of competition always present in the market. The necessity of this condition highlights that dynamic entry need not create enough competition to guarantee price taking even if agents are arbitrarily patient. The sufficiency of this condition highlights that everyone can be a price taker even in markets that appear extremely thin at every point in time.
Date: 2020-07-20
New Economics Papers: this item is included in nep-cta, nep-ind and nep-mic
Note: mle30
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2070.pdf
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2070
Access Statistics for this paper
More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().