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Journal Article

Choosing Sides in Matching Games: Nash Equilibria and Comparative Statics

Michael R. Baye and Thomas F. Cosimano
Economica
New Series, Vol. 57, No. 227 (Aug., 1990), pp. 283-293
DOI: 10.2307/2554935
Stable URL: http://www.jstor.org/stable/2554935
Page Count: 11
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Choosing Sides in Matching Games: Nash Equilibria and Comparative Statics
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Abstract

This paper characterizes equilibria in matching games where the institutional setting allows players to choose whether to become buyers, sellers, or not to participate in economic activity. Nash equilibrium consists of a partition of agents into buyers, sellers, and non-participants such that agents in each group do not have an incentive to change their activity given the behaviour of other agents. Comparative-static analysis demonstrates that, when participation costs are so high that some agents choose not to participate, a further increase in participation costs may increase the number of agents who participate in the matching process.

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