Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244327 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
Discussion Paper No. 287
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders' fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches the Walrasian competitive equilibrium, independently of the traders' inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining.
Subjects: 
Fairness
inequity aversion
bargaining
ultimatum game
matchingmarket
search costs
competitive equilibrium
JEL: 
C78
D5
D6
D83
D9
Document Type: 
Working Paper

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