SFB 303 Discussion Paper No. B-171

Author: Moldovanu, Benny
Title: Price Indeterminacy and Bargaining in a Market with Indivisibilities
Abstract: We consider an exchange market for an indivisible, heterogeneous good where pairs of buyers and sellers bargain over prices in different transactions. A stable outcome in one negotiation can not be uniquely determined by the outcome of other negotiations, but the result of those transactions has influence through endogenously determined outside options. We prove existence of equilibria with the property that no agent wishes to rebargain. These bargaining equilibria form a subset of the set of Walrasian equilibria. In a replicated market we show that all Walrasian equilibria are already stable under rebargaining. We describe also a bargaining process which converges to the set of equilibria.
Creation-Date: November 1990
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