Long-Term Relationship Bargaining

Andreas Westermark

No 266, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We analyze a bargaining model where there is a long-term relationship between a seller and a buyer and there is bargaining over a sequence of surpluses that arrives at fixed points in time. Markov Perfect Equilibria are analyzed and equilibrium payoffs characterized. The transfers between the players can be described as a first-order system of difference equations. Payoffs depend on both current and future surpluses. Future surpluses are important partly because the risk of separation leads to the loss of surplus today and in the future and partly because delay without separation can last into future periods. We also find conditions for existence and uniqueness of equilibria with immediate agreement.

Keywords: Bargaining; long term relationship (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-04-01
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0266

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