The Nash bargaining solution in vertical relations with linear input prices
Markus Dertwinkel-Kalt () and
Christian Wey ()
Economics Letters, 2016, vol. 145, issue C, 291-294
We re-examine the Nash bargaining solution when an upstream and N downstream firms bargain over a linear input price with unobservable contracts. We show that the profit sharing rule is given by a simple and instructive formula which depends on the parties’ disagreement payoffs, the profit weights in the Nash-product and the elasticity of derived demand. A downstream firm’s profit share increases in the equilibrium derived demand elasticity which in turn depends on the final goods’ demand elasticity.
Keywords: Vertical relations; Nash bargaining; Demand elasticity (search for similar items in EconPapers)
JEL-codes: L12 L13 (search for similar items in EconPapers)
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Working Paper: The Nash bargaining solution in vertical relations with linear input prices (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:145:y:2016:i:c:p:291-294
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