Multi-player bargaining with endogenous capacity

Camera, Gabriele and Selcuk, Cemil ORCID: https://orcid.org/0000-0002-2267-604X 2010. Multi-player bargaining with endogenous capacity. Review of Economic Dynamics 13 (3) , pp. 637-653. 10.1016/j.red.2009.06.002

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Abstract

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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Uncontrolled Keywords:	Commitment; Inefficiency; Peripheral players; Price heterogeneity; Noncooperative bargaining
Publisher:	Elsevier
ISSN:	1094-2025
Last Modified:	19 Oct 2022 08:57
URI:	https://orca.cardiff.ac.uk/id/eprint/19612

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