Delay in Trade Networks

Thành Nguyen (), Vijay Subramanian () and Randall Berry ()
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Thành Nguyen: Krannert School of Management, Purdue University, West Lafayette, Indiana 47907
Vijay Subramanian: Electrical Engineering and Computer Science Department, University of Michigan, Ann Arbor, Michigan 48109
Randall Berry: Department of Electrical Engineering and Computer Science, Northwestern University, Evanston, Illinois 60208

Operations Research, 2016, vol. 64, issue 3, 646-661

Abstract: We study decentralized markets involving producers and consumers that are facilitated by middlemen. We do this by analyzing a noncooperative networked bargaining game. We assume a complete information setup wherein all the agents know the structure of the network, the values of the consumers, and the transaction costs involved but allow for some search friction when either producers or consumers trade with middlemen. In such a setting, we show that sunk cost problems and a heterogeneous network can give rise to delay or failure in negotiation, and therefore reduce the total trade capacity of the network. In the limiting regime of extremely patient agents, we provide a sharp characterization of the trade pattern and the segmentation of these markets.

Keywords: noncooperative bargaining; supply chain networks; trade volume (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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