Rationing, bargaining, and voting in 2-sided markets (Q1083011)

This paper analyzes the temporary equilibrium of 2-sided markets from the point of view of bargaining theory. The minimum rule, quantity traded equal the minimum of demand and supply, is shown to hold under both the Nash bargain and the \(\lambda\)-transfer value. Moreover, both concepts imply that rationing is uniform on the long side of the market. The paper then considers disequilibrium price dynamics. Under majoritarian price dynamics, next period's price is the majority rule price of this period's active traders. The sequence of temporary equilibria according to the majoritarian price dynamics is shown to converge to Walrasian equilibrium.