Bilateral Oligopoly

Jonas Björnerstedt () and Johan Stennek ()
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Jonas Björnerstedt: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Johan Stennek: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

No 555, Working Paper Series from Research Institute of Industrial Economics

Abstract: In intermediate goods markets, both buyers and sellers normally have market power, and sales are based on bilaterally negotiated contracts specifying both price and quantity. In our model, pairs of buyers and sellers meet in bilateral but interdependent Rubinstein-Ståhl negotiations. The outcome has a simple characterization (a Nash equilibrium in Nash bargaining solutions) suitable for applied work. Equilibrium quantities are efficient regardless of concentration and also with few “trading links”. The law of one price does not hold. In addition to relation-specific characteristics, prices depend on both upstream and downstream concentration and on the structure of trading links. The requirements necessary for Walrasian prices are stronger than usually believed.

Keywords: Bilageral Oligopoly; Bargaining; Intermediate Goods; Decentralized Trade; Walrasian Outcome (search for similar items in EconPapers)
JEL-codes: C70 D20 D40 L10 L40 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2001-04-27
New Economics Papers: this item is included in nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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