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Vertical syndication-proof competitive prices in multilateral assignment markets

Oriol Tejada and Mikel Álvarez-Mozos

Review of Economic Design, 2016, vol. 20, issue 4, No 2, 289-327

Abstract: Abstract We consider a market comprising a number of perfectly complementary and homogeneous commodities. We concentrate on the incentives for firms producing these commodities to merge and form a vertical syndicate. The main result establishes that the nucleolus of the associated market game corresponds to the unique vector of prices with the following properties: (i) they are vertical syndication-proof, (ii) they are competitive, (iii) they yield the average of the buyers- and the sellers-optimal allocations in bilateral markets, and (iv) they depend on the traders’ bargaining power but not on their identity. The proof uses an isomorphism between our class of market games and the entire class of bankruptcy games.

Keywords: Multilateral market; Syndicate; Cooperative game; Assignment market; Bankruptcy problem; Nucleolus (search for similar items in EconPapers)
JEL-codes: C71 D40 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10058-016-0193-1

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