Fairness and Competition in a Bilateral Matching Market

Bester, Helmut (18. Oktober 2021): Fairness and Competition in a Bilateral Matching Market. Collaborative Research Center Transregio 190, Discussion Paper No. 287

Abstract

This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders’ fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches the Walrasian competitive equilibrium, independently of the traders’ inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining.

• Dokumententyp: Paper
• Keywords: Fairness, inequity aversion, bargaining, ultimatum game, matching market, search costs, competitive equilibrium
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition"
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: C78, D05, D06, D83, D09
• Sprache: Englisch