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http://hdl.handle.net/10419/53293
  
Title:Dynamic multilateral markets PDF Logo
Authors:Polanski, Arnold
Lazarova, Emiliya A.
Issue Date:2011
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Climate Change and Sustainable Development Series 44.2011
Abstract:We study dynamic multilateral markets, in which players' payoffs result from coalitional bargaining. In this setting, we establish payoff uniqueness of the stationary equilibria when players exhibit some degree of impatience. We focus on market games with different player types, and derive under mild conditions an explicit formula for each type's equilibrium payoff as market frictions vanish. The limit payoff of a type depends in an intuitive way on the supply and the demand for this type in the market, adjusted by the type-specific bargaining power. Our framework may be viewed as an alternative to the Walrasian price-setting mechanism. When we apply this methodology to the analysis of labor markets, we can determine endogenously the equilibrium firm size and remuneration scheme. We find that each worker type in a stationary market equilibrium is rewarded her marginal product, i.e. we obtain a strategic underpinning of the neoclassical wage. Interestingly, we can also replicate some standardized facts from the search-theoretical literature such as positive equilibrium unemployment.
Subjects:Multilateral Bargaining
Dynamic Markets
Labor Markets
JEL:C71
C72
C78
J30
L20
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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