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Ex Ante Price Offers in Matching Games Non-Steady States
Michael Peters
Abstract
A matching technology is proposed which permits the analysis of decentralized matching problems in which sellers can publicly commit to a trading price that differs from the price at which buyers expect to trade elsewhere in the market. The equilibrium path with this form of ex ante pricing is compared with the path for trading prices that prevails when prices are determined ex post by bargaining. It is shown that when demand and supply are nearly equal, the equilibrium ex ante price offer will lie below the Nash bargaining split, while this relationship will be reversed when the level of excess demand is large. It is shown that sellers will have an incentive to make ex ante offers when prices elsewhere are determined by Nash bargaining. This can be interpreted to mean that Nash bargaining is an unstable pricing institution.
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