A Model of Ordered Bargaining with Applications

18 Pages Posted: 22 Oct 2008

See all articles by Serge Moresi

Serge Moresi

Charles River Associates (CRA)

Steven C. Salop

Georgetown University Law Center

Yianis Sarafidis

Charles River Associates (CRA)

Date Written: October 20, 2008

Abstract

We present a model of ordered bargaining between one buyer and several sellers, with Nash bargaining at each stage. We first show that the model has the property that the buyer's payoff equals the expected utility of a weighted sum of independent Bernoulli random variables. We then exploit this property to uncover further properties and implications of the model using standard results from expected utility and probability theory. We derive some potential implications for merger analysis and we outline an application of the model to the allocation of pork barrel spending.

Keywords: bargaining, ordered bargaining, Nash bargaining solution

JEL Classification: C78

Suggested Citation

Moresi, Serge and Salop, Steven C. and Sarafidis, Yianis, A Model of Ordered Bargaining with Applications (October 20, 2008). Available at SSRN: https://ssrn.com/abstract=1287224 or http://dx.doi.org/10.2139/ssrn.1287224

Serge Moresi

Charles River Associates (CRA) ( email )

1201 F Street, NW
Suite 700
Washington, DC 20004
United States
(202)662-3847 (Phone)

Steven C. Salop

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9095 (Phone)
202-662-9497 (Fax)

Yianis Sarafidis (Contact Author)

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

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