Centralized Bargaining with Pre-donation in a Vertically Related Industry

Ismail Saglam

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the incentives for, and the welfare effects of, pre-donation in a vertically related industry where two downstream firms that produce a homogenous good jointly bargain, using the generalized Nash rule, with an upstream firm over a linear input price before they engage in Cournot competition. We theoretically show that the downstream industry has no incentive to make any pre-donation and this is irrespective of its bargaining power. We also show computationally that (i) the upstream firm finds to make unilateral pre-donation optimal if and only if its bargaining power is sufficiently small and (ii) its optimal pre-donation (whenever positive) always yields Pareto welfare gains.

Keywords: Vertically related industry; Nash bargaining; pre-donation. (search for similar items in EconPapers)
JEL-codes: C78 L12 L13 L22 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Centralized bargaining with pre‐donation in a vertically related industry (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:114835

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