Bargaining Power and Firm Profits in Asymmetric Duopoly: An Inverted-U Relationship

30 Pages Posted: 7 Jan 2017

See all articles by Shohei Yoshida

Shohei Yoshida

University of Tokyo - Institute of Social Science

Date Written: January 1, 2017

Abstract

This paper investigates the effects of bargaining power on downstream firms’ profits. Consider a vertically related industry consisting of one upstream and two downstream firms, the latter having different marginal costs. Each pair bargains over a linear wholesale price, and then the downstream firms engage in Cournot competition. We show that the inefficient downstream firm may benefit from an increase in the bargaining power of the upstream firm. Furthermore, we obtain similar results when each downstream firm trades with its exclusive upstream agent, or downstream firms compete in price.

Keywords: Nash bargaining, Bargaining power, Profit, Firm asymmetry, Vertical relationship

JEL Classification: D43, J51, L25

Suggested Citation

Yoshida, Shohei, Bargaining Power and Firm Profits in Asymmetric Duopoly: An Inverted-U Relationship (January 1, 2017). Available at SSRN: https://ssrn.com/abstract=2892177 or http://dx.doi.org/10.2139/ssrn.2892177

Shohei Yoshida (Contact Author)

University of Tokyo - Institute of Social Science ( email )

Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan

HOME PAGE: http://https://sites.google.com/site/shoheiyoshida0/

Register to save articles to
your library

Register

Paper statistics

Downloads
82
rank
284,280
Abstract Views
353
PlumX Metrics