Bilateral Oligopoly

46 Pages Posted: 18 Jul 2001

See all articles by Jonas Bjornerstedt

Jonas Bjornerstedt

Research Institute of Industrial Economics (IFN)

Johan Stennek

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: June 2001

Abstract

In many intermediate goods markets buyers and sellers both have market power. Contracts are usually long-term and negotiated bilaterally, codifying many elements in addition to price. We model such bilateral oligopolies as a set of simultaneous Rubinstein-Stahl bargainings between pairs of buyers and sellers, over contracts specifying price and quantity. Equilibrium quantities are efficient regardless of concentration. The law of one price does not hold. Prices depend on concentration of capital and concentration of sales. If the quantity sold represents a small share of both the firms' sales and purchases, then the price is close to the Walrasian price.

Keywords: Bilateral oligopoly, bargaining, intermediate goods, decentralized trade, Walrasian outcome

JEL Classification: C70, D20, D40, L10, L40

Suggested Citation

Bjornerstedt, Jonas and Stennek, Johan, Bilateral Oligopoly (June 2001). CEPR Discussion Paper No. 2864. Available at SSRN: https://ssrn.com/abstract=276785

Jonas Bjornerstedt (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 5501
S-114 85 Stockholm
Sweden
+46 8 665 4521 (Phone)
+46 8 665 4599 (Fax)

Johan Stennek

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 5501
S-114 85 Stockholm
Sweden
+46 8 665 4536 (Phone)
+46 8 665 4599 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
1,676
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information