We study equilibrium prices and trade volume in a market with several identical buyers and a seller who commits to an inventory and then offers goods sequentially. Prices are determined by a strategic costly bargaining process with a random sequence of proponents. A unique subgame perfect equilibrium exists, characterized by no costly delays and heterogeneous sale prices. In equilibrium constraining capacity is a bargaining tactic the seller uses to improve a weak bargaining position. With capacity constraints, sale prices approach the outcome of an auction as bargaining costs vanish. The framework provides a building block for price formation in models of equilibrium search with multilateral matching, and offers a rationale for the adoption of single-unit auctions with fixed reservation price.
Multi-player bargaining with endogenous capacity / Camera, Gabriele*; Selcuk, Cemil. - In: REVIEW OF ECONOMIC DYNAMICS. - ISSN 1094-2025. - STAMPA. - 13:3(2010), pp. 637-653. [10.1016/j.red.2009.06.002]
Multi-player bargaining with endogenous capacity
Camera, Gabriele
;
2010
Abstract
We study equilibrium prices and trade volume in a market with several identical buyers and a seller who commits to an inventory and then offers goods sequentially. Prices are determined by a strategic costly bargaining process with a random sequence of proponents. A unique subgame perfect equilibrium exists, characterized by no costly delays and heterogeneous sale prices. In equilibrium constraining capacity is a bargaining tactic the seller uses to improve a weak bargaining position. With capacity constraints, sale prices approach the outcome of an auction as bargaining costs vanish. The framework provides a building block for price formation in models of equilibrium search with multilateral matching, and offers a rationale for the adoption of single-unit auctions with fixed reservation price.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
