Dynamic Matching and Bargaining with Heterogeneous Deadlines

Recognition Program

Authors: Sjaak Hurkens and Nir Vulkan

International Journal of Game Theory, Vol. 44, No 3, 599-629, August, 2015

This paper analyzes bargaining outcomes when agents do not have stationary time preferences (as represented by a constant discount factor) but are pressed by firm deadlines. We consider a dynamic model where traders with heterogeneous deadlines are matched randomly into pairs who then bargain about the division of a fixed surplus. A trader leaves the market when an agreement has been reached or when his deadline expires. Our analysis encompasses both the case of perfect and imperfect information about the partner’s deadline. We define, characterize and show the existence of a stationary equilibrium configuration. We characterize when delay occurs and when deadlines are missed in equilibrium and show that the payoffs of traders are strictly increasing and concave in own deadline, unless bargaining takes place under imperfect

This paper originally appeared as Barcelona School of Economics Working Paper 188
This paper is acknowledged by the Barcelona School of Economics Recognition Program