Bargaining and Delay in
Trading Networks y
Mikel Bedayoa, Ana Mauleona;b,
Vincent Vannetelboscha;b
aCORE, University of Louvain, Voie du Roman Pays 34, B-1348 Louvain-la-Neuve,
Belgium.
bCEREC, University of Saint-Louis .Brussels, Boulevard du Jardin Botanique 43,
B-1000 Brussels, Belgium.
April 11, 2014
Abstract
We study a model in which heterogenous agents .rst form a trading network
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 su¢ cient conditions such that core periphery networks are
Stable trading networks
Proof of Lemma 1.
(i) First, we show that a strong player always wants to link to a weak player if
in the current network there are at least two strong players as intermediaries on the
geodesic between the strong player and the weak player. Remember that a geodesic
between players i and j is a shortest path between these nodes; that is, a path with
no more links than any other path between these nodes.
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