An application of wage bargaining to price negotiation with discount factors varying in time

Ahmet Ozkardas () and Agnieszka Rusinowska
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Ahmet Ozkardas: Turgut Özal Üniversitesi et Centre d'Economie de la Sorbonne, https://centredeconomiesorbonne.cnrs.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We consider a non-cooperative price bargaining model between a monopolistic producer and a monopsonic consumer. The innovative element that our model brings to the existing literature on price negotiation concerns the parties' preferences which are not expressed by constant discount rates, but by sequences of discount factors varying in time. We assume that the sequence of discount rates of a party can be arbitrary, with the only restriction that the infinite series that determines the utility for the given party must be convergent. Under certain parameters, the price negociation model coincides with wage bargaining with the exogenous always strike decision. We determine the unique subgame perfect equilibrium in this model for no-delay strategies independent of the former history of the game. Then we relax the no-delay assumption and determine the highest equilibrium payoff of the seller and the lowest equilibrium payoff of the buyer for the general case. We show that the no-delay equilibrium strategy profiles support these extreme payoffs

Keywords: Price bargaining; alternating offers; varying discount rates; subgame perfect equilibrium (search for similar items in EconPapers)
JEL-codes: C78 E31 J52 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-10
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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ftp://mse.univ-paris1.fr/pub/mse/CES2013/13066.pdf (application/pdf)

Related works:
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
Working Paper: An application of wage bargaining to price negotiation with discount factors varying in time (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:13066

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