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- Title
Buyer power and mutual dependency in a model of negotiations.
- Authors
Inderst, Roman; Montez, Joao
- Abstract
We study bilateral bargaining between several buyers and sellers in a framework that allows both sides, in case of a bilateral disagreement, flexibility to adjust trade with each of their other trading partners and receive the gross benefit generated by each adjustment. A larger buyer pays a higher per‐unit price when buyers' bargaining power in bilateral negotiations is sufficiently low, and a lower price otherwise. An analogous result holds for sellers. These predictions, and the implications of different technologies, are explained by the fact that size is a source of mutual dependency and not an unequivocal source of power.
- Subjects
PURCHASING agents; DEALERS (Retail trade); STRUCTURAL frames; TECHNOLOGY; BUILDING trades
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2019, Vol 50, Issue 1, p29
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12261