Nash bargaining and renegotiation with social preferences: case of the roundwood log supply contracts

Ahmed Barkaoui () and Arnaud Dragicevic
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Arnaud Dragicevic: Laboratoire d'Economie Forestière, INRA - AgroParisTech

No 2014-08, Working Papers - Cahiers du LEF from Laboratoire d'Economie Forestiere, AgroParisTech-INRA

Abstract: We consider two economic agents, a timber and log supplier and a lumber manufacturer, endowed with the mean-variance utility preferences that negotiate according to the Nash bargaining game. We study both negotiation and renegotiation between a supplier that can be either public-oriented or profit-maximizing and a profit-maximizing manufacturer. We first prove that the Nash bargaining game has a unique equilibrium log supply contract, at which the negotiation takes only place on the prices. We then find that the expected profitmaximizing is achieved when the supplier’s public interest and the manufacturer’s bargaining power are strategic substitutes. The renegotiation reveals the presence of a memory effect over the quantities issued from bargaining. As well, it unveils strategic complementarity of changes in expected profits. The simulations we conduct provide an insight of the model outcomes.

Keywords: Nash Bargaining; Renegotiation; Social Preferences; Supply Contracts; Forest-Based Sector (search for similar items in EconPapers)
JEL-codes: C78 D21 D86 L33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2014-07, Revised 2014-07
New Economics Papers: this item is included in nep-gth, nep-mic and nep-upt
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Citations: View citations in EconPapers (1)

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