Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 2006:6: Bargaining and Strategic Discrimination
Jonas Björnerstedt () and Andreas Westermark ()
Additional contact information
Jonas Björnerstedt: The Research Institute for Industrial Economics, Postal: The Research Institute for Industrial Economics, P.O Box 55665, SE-102 15 Stockholm, Sweden
Andreas Westermark: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: In bargaining between two sellers and one buyer on prices and quantities, strategic inefficiencies arise. By reallocating between the last agreement and the first, the buyer can increase it's share of the surplus. With symmetric sellers producing substitutes, the quantities in the first agreement will be higher than the efficient, and lower than the efficient in the last, implying that sellers are strategically discriminated. In equilibrium when the sellers produce substitutes, the buyer agrees first with the seller with lowest marginal cost. Efficiency is decreasing in the symmetry of the sellers and in the relative bargaining power of the sellers.
Keywords: Bargaining; discrimination; intermediate goods; labor demand
36 pages, February 8, 2006
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