An application of wage bargaining to price negotiation with discount factors varying in time
We consider a non-cooperative price bargaining model between a monopolistic producer and a monopsonic consumer. The innovative element that our model brings to the existing literature on price negotiation concerns the parties' preferences which are not expressed by constant discount rates, but by sequences of discount factors varying in time. We assume that the sequence of discount rates of a party can be arbitrary, with the only restriction that the infinite series that determines the utility for the given party must be convergent. Under certain parameters, the price negociation model coincides with wage bargaining with the exogenous always strike decision. We determine the unique subgame perfect equilibrium in this model for no-delay strategies independent of the former history of the game. Then we relax the no-delay assumption and determine the highest equilibrium payoff of the seller and the lowest equilibrium payoff of the buyer for the general case. We show that the no-delay equilibrium strategy profiles support these extreme payoffs.
|Date of creation:||Oct 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 33 44 07 81 00
Fax: + 33 1 44 07 83 01
Web page: http://centredeconomiesorbonne.univ-paris1.fr/
More information through EDIRC
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.:
- Tversky, Amos & Kahneman, Daniel, 1991. "Loss Aversion in Riskless Choice: A Reference-Dependent Model," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1039-61, November.
- Peter Cramton & Joseph S. Tracy, 1994.
"Wage Bargaining with Time-Varying Threats,"
Papers of Peter Cramton
94jolew, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-11, May.
- Moulet, Sonia & Rouchier, Juliette, 2008.
"The influence of seller learning and time constraints on sequential bargaining in an artificial perishable goods market,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 32(7), pages 2322-2348, July.
- Sonia Moulet & Juliette Rouchier, 2009. "The influence of seller learning and time constraints on sequential bargaining in an artificial perishable goods market," Working Papers halshs-00353505, HAL.
- Cason, Timothy N. & Friedman, Daniel & Milam, Garrett H., 2003. "Bargaining versus posted price competition in customer markets," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 223-251, February.
- Coles, Melvyn G. & Muthoo, Abhinay, 2003. "Bargaining in a non-stationary environment," Journal of Economic Theory, Elsevier, vol. 109(1), pages 70-89, March.
- Fernández-Blanco, Javier, 2012. "A directed search model of intermediated trade," European Economic Review, Elsevier, vol. 56(8), pages 1481-1494.
- Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011.
"External referencing and pharmaceutical price negotiation,"
- Begoña Garcia Mariñoso & Izabela Jelovac & Pau Olivella, 2011. "External referencing and pharmaceutical price negotiation," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 737-756, June.
- Garcia Marinoso, Begona & Jelovac, Izabella & Olivella, Pau, 2011. "External referencing and pharmaceutical price negociation," Economics Papers from University Paris Dauphine 123456789/5987, Paris Dauphine University.
- Raquel Fernandez & Jacob Glazer, 1989.
"Striking for a Bargain Between Two Completely Informed Agents,"
NBER Working Papers
3108, National Bureau of Economic Research, Inc.
- Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-52, March.
- Peter C. Cramton, 1991.
"Dynamic Bargaining with Transaction Costs,"
INFORMS, vol. 37(10), pages 1221-1233, October.
- Joydeep Srivastava & Dipankar Chakravarti & Amnon Rapoport, 2000. "Price and Margin Negotiations in Marketing Channels: An Experimental Study of Sequential Bargaining Under One-sided Uncertainty and Opportunity Cost of Delay," Marketing Science, INFORMS, vol. 19(2), pages 163-184, October.
- Feri, Francesco & Gantner, Anita, 2011. "Bargaining or searching for a better price? - An experimental study," Games and Economic Behavior, Elsevier, vol. 72(2), pages 376-399, June.
- Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Oczkowski, Edward, 1998. "An econometric analysis of the bilateral monopoly model," Economic Modelling, Elsevier, vol. 16(1), pages 53-69, January.
- Van Poucke, Dirk & Buelens, Marc, 2002. "Predicting the outcome of a two-party price negotiation: Contribution of reservation price, aspiration price and opening offer," Journal of Economic Psychology, Elsevier, vol. 23(1), pages 67-76, February.
When requesting a correction, please mention this item's handle: RePEc:mse:cesdoc:13066. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lucie Label)
If references are entirely missing, you can add them using this form.