AbstractIn intermediate goods markets, both buyers and sellers normally have market power, and sales are based on bilaterally negotiated contracts specifying both price and quantity. In our model, pairs of buyers and sellers meet in bilateral but interdependent Rubinstein-Ståhl negotiations. The outcome has a simple characterization (a Nash equilibrium in Nash bargaining solutions) suitable for applied work. Equilibrium quantities are efficient regardless of concentration and also with few “trading links”. The law of one price does not hold. In addition to relation-specific characteristics, prices depend on both upstream and downstream concentration and on the structure of trading links. The requirements necessary for Walrasian prices are stronger than usually believed.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 555.
Length: 42 pages
Date of creation: 27 Apr 2001
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Bilageral Oligopoly; Bargaining; Intermediate Goods; Decentralized Trade; Walrasian Outcome;
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
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- NEP-GTH-2001-05-02 (Game Theory)
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