Nash bargaining and renegotiation with social preferences: case of the roundwood log supply contracts in the French timber market

Ahmed Barkaoui and Arnaud Z. Dragicevic ()
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Ahmed Barkaoui: LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech
Arnaud Z. Dragicevic: LEF - Laboratoire d'Economie Forestière - INRA - Institut National de la Recherche Agronomique - AgroParisTech

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Abstract: By considering the French forest-based sector, we study both negotiation and renegotiation between a public timber and roundwood log supplier, which can be either public-interest-oriented or profit-maximizing, and a profit-maximizing lumber manufacturer. We first prove that the Nash bargaining game yields a unique equilibrium log supply contract, at which the negotiation takes only place on the prices. We then find that the expected profit-maximizing 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. Our results can be generalized to all economic settings that revolve around public interest and commodity risk management.

Keywords: Operational research; Nash bargaining; Renegotiation; Social preferences; Supply contracts; Forest-based sector (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

Published in Forest Policy and Economics, 2016, 69, pp.90-100. ⟨10.1016/j.forpol.2016.04.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01352691

DOI: 10.1016/j.forpol.2016.04.007

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