Multi-player Bargaining with Endogenous Capacity1
نویسندگان
چکیده
We study equilibrium prices and trade volume in a market with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique subgame perfect equilibrium exists. It is characterized by absence of costly bargaining delays and each trade is settled at a different price. Prices increase with n and fall in the seller’s capacity, so if buyers have significant bargaining power, then the seller will strategically constrain capacity to less than n. Thus, despite the efficiency of the bargaining solution, certain distributions of bargaining powers give rise to an allocative inefficiency.
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