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)
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Volume (Year): 13 (2010)
Issue (Month): 3 (July)
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- repec:cmf:wpaper:wp2004_0415 is not listed on IDEAS
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- Gabriele Camera & Cemil Selcuk, 2009.
"Price Dispersion with Directed Search,"
Journal of the European Economic Association,
MIT Press, vol. 7(6), pages 1193-1224, December.
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