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Bilateral Oligopoly

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Author Info
Björnerstedt, Jonas
Stennek, Johan

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Abstract

In many intermediate goods markets buyers and sellers both have market power. Contracts are usually long-term and negotiated bilaterally, codifying many elements in addition to price. We model such bilateral oligopolies as a set of simultaneous Rubinstein-Ståhl bargainings between pairs of buyers and sellers, over contracts specifying price and quantity. Equilibrium quantities are efficient regardless of concentration. The law of one price does not hold. Prices depend on concentration of capital and concentration of sales. If the quantity sold represents a small share of both the firms' sales and purchases, then the price is close to the Walrasian price.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2864.

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Date of creation: Jun 2001
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Handle: RePEc:cpr:ceprdp:2864

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Related research
Keywords: bargaining; bilateral oligopoly; decentralized trade; intermediate goods; walrasian outcome;

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
D20 - Microeconomics - - Production and Organizations - - - General
D40 - Microeconomics - - Market Structure and Pricing - - - General
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

Cited by:
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  1. Björnerstedt, Jonas & Westermark, Andreas, 2006. "Bargaining and Strategic Discrimination," Working Paper Series 2006:6, Uppsala University, Department of Economics. [Downloadable!]
  2. Roman Inderst & Christian Wey, 2005. "Buyer Power and Supplier Incentives," Discussion Papers of DIW Berlin 464, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  3. Jim Engle-Warnick & Bradley Ruffle, 2002. "Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets," Economics Papers 2002-W14, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  4. Suchan Chae & Paul Heidhues, 2003. "Buyers’ Alliances for Bargaining Power," CIG Working Papers SP II 2003-24, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
    Other versions:
  5. Milliou, Chrysovalantou & Petrakis, Emmanuel & Vettas, Nikolaos, 2003. "Endogenous Contracts Under Bargaining in Competing Vertical Chains," CEPR Discussion Papers 3976, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Stennek, Johan & Tangerås, Thomas P., 2007. "Competition vs. Regulation in Mobile Telecommunications," CEPR Discussion Papers 6073, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Jonas Björnerstedt & Andreas Westermark, 2009. "The inefficiency of price quantity bargaining," Economic Theory, Springer, vol. 40(2), pages 301-332, August. [Downloadable!] (restricted)
  8. Joshua Gans & Catherine de Fontenay, 2004. "Vertical Integration in the Presence of Upstream Competition," Econometric Society 2004 North American Winter Meetings 7, Econometric Society. [Downloadable!]
    Other versions:
  9. Howard Smith & John Thanassoulis, 2009. "Upstream Competition and Downstream Buyer Power," Economics Series Working Papers 420, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  10. Johan Stennek & Thomas TangerŒs, 2008. "Competition vs. Regulation in Mobile Telecommunications," Working Papers 08-09, NET Institute, revised Sep 2008. [Downloadable!]
  11. Biglaiser, Gary & Vettas, Nikolaos, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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