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Multi-player Bargaining with Endogenous Capacity

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Author Info

  • Gabriele Camera

    (University of Iowa)

  • Cemil Selcuk

    (DePaul University)

Abstract

We study equilibrium prices and trade volume in a market with several identical buyers and a seller who commits to an inventory and then offers goods sequentially. Prices are determined by a strategic costly bargaining process with a random sequence of proponents. A unique subgame perfect equilibrium exists, characterized by no costly delays and heterogeneous sale prices. In equilibrium constraining capacity is a bargaining tactic the seller uses to improve a weak bargaining position. With capacity constraints, sale prices approach the outcome of an auction as bargaining costs vanish. The framework provides a building block for price formation in models of equilibrium search with multilateral matching, and offers a rationale for the adoption of single-unit auctions with fixed reservation price. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.06.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 3 (July)
Pages: 637-653

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Handle: RePEc:red:issued:08-145

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Related research

Keywords: Commitment; Inefficiency; Peripheral players; Price heterogeneity; Noncooperative bargaining;

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References

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  1. Guillermo Caruana & Liran Einav & Daniel Quint, 2004. "Multilateral Bargaining With Concession Costs," Working Papers wp2004_0415, CEMFI.
  2. Gabriele Camera & Cemil Selcuk, 2009. "Price Dispersion with Directed Search," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1193-1224, December.
  3. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
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Cited by:
  1. Selcuk, Cemil, 2011. "Trading Mechanism Selection with Directed Search when Buyers are Risk Averse," MPRA Paper 36224, University Library of Munich, Germany.
  2. Selcuk, Cemil, 2011. "Trading mechanism selection with budget constraints," MPRA Paper 36227, University Library of Munich, Germany.

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