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Investment and Market Structure in Common Agency Games

Guillem Roig

No 16203, Documentos de Trabajo from Universidad del Rosario

Abstract: I study the incentives of a common buyer to undertake cooperative investment with a group of suppliers providing a homogeneous input. In my model, investment is not directed to increase the gains from trade but to enhance the competitive pressure among suppliers. At the same time, however, investment may strengthen the bargaining position of suppliers. Which effect dominates depends on the intensity of competition in the trading game, which also determines the equilibrium distribution of investment. Then, the model reproduces different market structures, and a firm may have higher incentives to become active in markets where competition is expected to be vigorous.

Keywords: Cooperative investment; Market structure; Competition; Bargaining position (search for similar items in EconPapers)
Pages: 41
Date: 2018-04-01
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:016203

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