Multi-player Bargaining with Endogenous Capacity
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)
Volume (Year): 13 (2010)
Issue (Month): 3 (July)
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- Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
- Caruana, Guillermo & Einav, Liran & Quint, Daniel, 2007.
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Journal of Economic Theory,
Elsevier, vol. 132(1), pages 147-166, January.
- Camera, Gabriele & Selcuk, Cemil, 2004.
"Price Dispersion with Directed Search,"
Purdue University Economics Working Papers
1173, Purdue University, Department of Economics.
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