Working Paper: CEPR ID: DP13644
Authors: Roman Inderst; João Montez
Abstract: We study bilateral bargaining between several buyers and sellers in a framework that allowsboth sides, in case of a bilateral disagreement, flexibility to adjust trade with each of their othertrading partners and receive the gross benefit generated by each adjustment. A larger buyer paysa higher per-unit price when buyers’ bargaining power in bilateral negotiations is sufficientlylow, and a lower price otherwise. An analogous result holds for sellers. These predictions, andthe implications of different technologies, are explained by the fact that size is a source of mutualdependency and not an unequivocal source of power.
Keywords: Buyer Power; Negotiations; Bargaining Model; Market Dynamics
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger buyer (L14) | higher per-unit price (D49) |
| seller's bargaining power (L14) | higher per-unit price (D49) |
| larger buyer + high seller's bargaining power (L14) | higher per-unit price (D49) |
| larger buyer + single seller (D41) | lower per-unit price (D41) |
| size of buyer (L81) | bargaining outcomes (C78) |
| size of seller (D49) | bargaining outcomes (C78) |
| ability to adjust trades (F16) | bargaining outcomes (C78) |