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Nash bargaining and renegotiation with social preferences: case of the roundwood log supply contracts

Author

Listed:
  • Ahmed Barkaoui

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

  • Arnaud Dragicevic

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech
    Chaire Forêts pour Demain, Agro ParisTech–Office National des Forêts)

Abstract

We consider two economic agents, a timber and log supplier and a lumber manufacturer, endowed with the mean-variance utility preferences that negotiate according to the Nash bargaining game. We study both negotiation and renegotiation between a supplier that can be either public-oriented or profit-maximizing and a profit-maximizing manufacturer. We first prove that the Nash bargaining game has a unique equilibrium log supply contract, at which the negotiation takes only place on the prices. We then find that the expected profitmaximizing is achieved when the supplier’s public interest and the manufacturer’s bargaining power are strategic substitutes. The renegotiation reveals the presence of a memory effect over the quantities issued from bargaining. As well, it unveils strategic complementarity of changes in expected profits. The simulations we conduct provide an insight of the model outcomes.

Suggested Citation

  • Ahmed Barkaoui & Arnaud Dragicevic, 2014. "Nash bargaining and renegotiation with social preferences: case of the roundwood log supply contracts," Working Papers - Cahiers du LEF 2014-08, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Jul 2014.
    • Handle: RePEc:lef:wpaper:2014-08
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    File URL: http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2014/2014-08
    File Function: First version, 2010
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    Cited by:

    1. Dragicevic, Arnaud Z. & Barkaoui, Ahmed, 2017. "Forest-based industrial network: Case of the French timber market," Forest Policy and Economics, Elsevier, vol. 75(C), pages 23-33.

    More about this item

    Keywords

    Nash Bargaining; Renegotiation; Social Preferences; Supply Contracts; Forest-Based Sector;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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