Multi-player Bargaining with Endogenous Capacity

Gabriele Camera and Cemil Selcuk

Review of Economic Dynamics, 2010, vol. 13, issue 3, 637-653

Abstract: We study equilibrium prices and trade volume in a market with several identical buyers and a seller who commits to an inventory and then offers goods sequentially. Prices are determined by a strategic costly bargaining process with a random sequence of proponents. A unique subgame perfect equilibrium exists, characterized by no costly delays and heterogeneous sale prices. In equilibrium constraining capacity is a bargaining tactic the seller uses to improve a weak bargaining position. With capacity constraints, sale prices approach the outcome of an auction as bargaining costs vanish. The framework provides a building block for price formation in models of equilibrium search with multilateral matching, and offers a rationale for the adoption of single-unit auctions with fixed reservation price. (Copyright: Elsevier)

Keywords: Commitment; Inefficiency; Peripheral players; Price heterogeneity; Noncooperative bargaining (search for similar items in EconPapers)
JEL-codes: C78 D0 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.red.2009.06.002

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