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 Rubenstein-Stahl bargainings over contracts specifying price and quantity, between pairs of buyers and sellers. 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, the price is close to the Walrasian price.
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Length: 41 pages Date of creation: 2001 Date of revision: Handle: RePEc:fth:iniesr:555
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Find related papers by JEL classification: C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance L4 - Industrial Organization - - Antitrust Issues and Policies D2 - Microeconomics - - Production and Organizations D4 - Microeconomics - - Market Structure and Pricing
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