An application of wage bargaining to price negotiation with discount factors varying in time

Ahmet Ozkardas () and Agnieszka Rusinowska
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Ahmet Ozkardas: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: 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.

Keywords: Price bargaining; alternating offers; varying discount rates; subgame perfect equilibrium; Négociation de prix; offres alternantes; taux d'escompte variant dans le temps; équilibre parfait en sous-jeu (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00881151v1
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Citations: View citations in EconPapers (3)

Published in 2013

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Related works:
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
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