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Noncooperative Bargaining and Spatial Competition

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  • Bester, Helmut

Abstract

The article develops a bargaining model of spatial competition. Sellers compete by choosing locations in a market region. Consumers face a cost to moving from one place to another. The price of the good is determined as the perfect equilibrium of a bargaining game between seller and buyer. In this game, the buyer has the outside option to move to another seller and so the prices at all stores are interdependent. Existence of a location-price equilibrium is established. The outcome approaches the perfectly-competitive one if the consumer's cost of traveling becomes negligible or if the number of sellers tends to infinity. Copyright 1989 by The Econometric Society.

Suggested Citation

  • Bester, Helmut, 1989. "Noncooperative Bargaining and Spatial Competition," Econometrica, Econometric Society, vol. 57(1), pages 97-113, January.
    • Handle: RePEc:ecm:emetrp:v:57:y:1989:i:1:p:97-113
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    Cited by:

    1. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225, Elsevier.
    2. Marie‐Louise Leroux & Gregory Ponthiere, 2020. "Nursing home choice, family bargaining, and optimal policy in a Hotelling economy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 899-932, August.
    3. Darrell Duffie, 2012. "Over-The-Counter Markets," Introductory Chapters, in: Dark Markets: Asset Pricing and Information Transmission in Over-the-Counter Markets, Princeton University Press.
    4. Bester, H. & de Palma, A. & Leininger, W. & Thomas, J.P., 1991. "The Missing Equilibria in Hotelling's Location Game," Discussion Paper 1991-63, Tilburg University, Center for Economic Research.
    5. Howard Smith & Walter Beckert & Yuya Takahashi, 2020. "Competition in a spatially-differentiated product market with negotiated prices," Economics Series Working Papers 921, University of Oxford, Department of Economics.
    6. Kopp, Andreas, 1994. "Price search, bargaining and agglomeration," Kiel Working Papers 618, Kiel Institute for the World Economy (IfW Kiel).
    7. Bester, H., 1991. "Bargaining V.S. Price Competition in a Market with Quality Uncertainty," Papers 9113, Tilburg - Center for Economic Research.
    8. Preyas S. Desai & Devavrat Purohit, 2004. "“Let Me Talk to My Manager”: Haggling in a Competitive Environment," Marketing Science, INFORMS, vol. 23(2), pages 219-233, August.
    9. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 293-304, May.
    10. Victor Manuel Bennett, 2013. "Organization and Bargaining: Sales Process Choice at Auto Dealerships," Management Science, INFORMS, vol. 59(9), pages 2003-2018, September.
    11. Hehenkamp, Burkhard & Wambach, Achim, 2010. "Survival at the center--The stability of minimum differentiation," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 853-858, December.
    12. H. A. Eiselt & Vladimir Marianov, 2020. "Stability of utility functions and apportionment rules in location models," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 28(3), pages 772-792, October.
    13. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    14. Eric Picard & Alexander Zimper, 2022. "Moving from a bad to a good pricing regime: The South African private health care market," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 260-276, June.

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