Economics at your fingertips  

Centralized or decentralized bargaining in a vertically-related market with endogenous price/quantity choices

Hong-Ren Din and Chia-Hung Sun ()
Additional contact information
Hong-Ren Din: Soochow University
Chia-Hung Sun: Soochow University

Journal of Economics, 2023, vol. 138, issue 1, No 4, 73-94

Abstract: Abstract This research investigates the endogenous choice of centralized or decentralized bargaining and the type of strategic variables by taking into account a vertically-related market where an upstream monopolist bargains with two downstream firms via a two-part input pricing contract. We show that centralized bargaining is the unique equilibrium mode of bargaining, given Cournot or Bertrand competition in the product market, and that choosing the quantity (price) contract is the dominant strategy for both downstream firms under decentralized (centralized) bargaining. When both the type of strategic variables and the mode of bargaining are endogenously determined, the unique equilibrium outcome is choosing price contracts and centralized bargaining, which maximize industry profit, but there is market failure.

Keywords: Vertically-related markets; Centralized Nash bargaining; Decentralized Nash bargaining; Endogenous strategic variables; Two-part pricing contract (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link) Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1007/s00712-022-00793-9

Access Statistics for this article

Journal of Economics is currently edited by Giacomo Corneo

More articles in Journal of Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2024-07-01
Handle: RePEc:kap:jeczfn:v:138:y:2023:i:1:d:10.1007_s00712-022-00793-9