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Bargaining and Strategic Discrimination

Author

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  • Björnerstedt, Jonas

    (The Research Institute for Industrial Economics)

  • Westermark, Andreas

    (Department of Economics)

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.

Suggested Citation

  • Björnerstedt, Jonas & Westermark, Andreas, 2006. "Bargaining and Strategic Discrimination," Working Paper Series 2006:6, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2006_006
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    References listed on IDEAS

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    Cited by:

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    3. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics.
    4. Stennek, Johan, 2007. "Exclusive Quality - Why Exclusive Distribution May Benefit the TV Viewers," CEPR Discussion Papers 6072, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Bargaining; discrimination; intermediate goods; labor demand;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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