Abstract
This paper studies a sequential bargaining model of a decentralised market. A main objective is to explore the conditions under which the unique subgame perfect equilibrium outcome of the market game approximates the Walrasian outcome of the market. The three main messages that emerge from our results are as follows. First, contrary to conventional wisdom, frictionless markets need not be Walrasian. Second, the relative magnitudes of frictions can have a profound impact on the market outcome even in the limit as the absolute magnitudes of the frictions become negligible. And third, the relative magnitudes of certain types of frictions may have to be significantly large in order for markets to be Walrasian, reflecting that certain types of frictions are needed in the market in order to induce the Walrasian outcome.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
