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Bilateral Oligopoly

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Author Info
Jonas Björnerstedt
Johan Stennek

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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 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.

ZUSAMMENFASSUNG - (Bilaterales Oligopol)
Auf vielen Märkten für Zwischenprodukte verfügen beide, Käufer und Verkäufer, über Marktmacht. Die Verträge, die üblicherweise langfristig abgeschlossen und bilateral verhandelt werden, legen zahlreiche über den Preis hinausgehende Elemente fest. In diesem Beitrag werden derartige Oligopole als simultane Rubinstein-Ståhl Verhandlungen über Verträge modelliert, die Preise und Mengen zwischen Paaren von Käufern und Verkäufern spezifizieren. Die Gleichgewichtsmengen sind unabhängig von der Konzentration effizient. Das Gesetz des einzigen Preises gilt nicht. Die Preise hängen von der Kapital- und Anbieterkonzentration ab. Wenn die Verkaufsmenge im Verhältnis zum Gesamtabsatz und dem Einkaufsvolumen der Unternehmen klein ist, dann kommt der Preis dem Walrasschen Preis nahe.

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Publisher Info
Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 01-08.

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Length: 41 pages
Date of creation: Apr 2001
Date of revision:
Handle: RePEc:wzb:wzebiv:fsiv01-08

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Related research
Keywords: Bilateral Oligopoly; Bargaining; Intermediate Goods; Decentralized Trade; Walrasian Outcome;

Other versions of this item:

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

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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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