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Investment and Market Structure in Common Agency Games

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  • Guillem Roig

Abstract

I study the incentives of a common buyer to undertake cooperative investment with a group of suppliers providing a homogeneous input. In my model, investment is not directed to increase the gains from trade but to enhance the competitive pressure among suppliers. At the same time, however, investment may strengthen the bargaining position of suppliers. Which effect dominates depends on the intensity of competition in the trading game, which also determines the equilibrium distribution of investment. Then, the model reproduces different market structures, and a firm may have higher incentives to become active in markets where competition is expected to be vigorous.

Suggested Citation

  • Guillem Roig, 2018. "Investment and Market Structure in Common Agency Games," Documentos de Trabajo 16203, Universidad del Rosario.
    • Handle: RePEc:col:000092:016203
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    References listed on IDEAS

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    Keywords

    Cooperative investment; Market structure; Competition; Bargaining position;
    All these keywords.

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