The search-theoretic approach to monetary economics: a primer

The authors present simple versions of models used in the search-theoretic approach to monetary economics. They discuss results on the existence of monetary equilibria, the potential for multiple equilibria, and welfare. Using bilateral bargaining theory, they consider models where prices are fixed as well as those where prices are determined endogenously. After describing the frictions necessary to construct a model where money has an essential role, they conclude by reviewing many extensions and applications in the related literatureMoney

Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes

We study bilateral exchange, both direct trade and indirect trade that happens through chains of intermediaries or middlemen. We develop a model of this activity and present applications. This illustrates how, and how many, intermediaries get involved, and how the terms of trade are determined. We show how bargaining with one intermediary depends on upcoming negotiations with downstream intermediaries, leading to holdup problems. We discuss the roles of buyers and sellers in bilateral exchanges, and how to interpret prices. We develop a particular bargaining solution and relate it to other solutions. In addition to contrasting our framework with other models of middlemen, we discuss the connection to different branches of search theory. We also illustrate how bubbles can emerge in intermediation.

Power Processes in Bargaining

This is a theoretical article that integrates and extends a particular program of work on power in bargaining relationships. Power is conceptualized as a structurally based capability, and power use as tactical action falling within either conciliatory or hostile categories. The core propositions are (1) the greater the total amount of power in a relationship, the greater the use of conciliatory tactics and the lower the use of hostile tactics; and (2) an unequal power relationship fosters more use of hostile tactics and less use of conciliatory tactics than an equal power relationship. Distinct research on power dependence and bilateral deterrence provides support for both propositions. Implications are discussed for power struggle in ongoing relationships

A comparison of the average prekernel and the prekernel

We propose positive and normative foundations for the average prekernel of NTU games, and compare them with the existing ones for the prekernel. In our non-cooperative analysis, the average prekernel is approximated by the set of equilibrium payoffs of a game where each player faces the possibility of bargaining at random against any other player. In the cooperative analysis, we characterize the average prekernel as the unique solution that satisfies a set of Nash-like axioms for two-person games, and versions of average consistency and its converse for multilateral setting

Empirical analysis of countervailing power in business-to-business bargaining

This paper provides a comprehensive econometric framework for the empirical analysis of countervailing power. It encompasses the two main features of pricing schemes in business-to-business relationships: nonlinear price schedules and bargaining over rents. Disentangling them is critical to the empirical identification of countervailing power. Testable predictions from the theoretical analysis for a pragmatic reduced form empirical pricing model are delineated. This model is readily implementable on the basis of transaction data, routinely collected by antitrust authorities and illustrated using data from the UK brick industry. The paper emphasizes the importance of controlling for endogeneity of volumes and established supply chains and for heterogeneity across buyers and sellers due to intrinsically unobservable outside options

Sequential Bilateral Bargaining and the Shapley value

We extend Ilya Segal's work on bilateral contracting in the presence of externalities to the case of bilateral bargaining in the presence of externalities. Similarly to Segal's work, we prove our results for highly general settings, and provide examples of applications.Bargaining, Non-cooperative foundations of cooperative game theory

Book Review of “Bargaining Theory with Applications” (Muthoo, 1999)

In this working paper, A. Muthoo’s book “Bargaining Theory with Applications” is discussed.