On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect

Prog K (2012)
Bielefeld: Universität Bielefeld.

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Bielefeld Dissertation | English
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Trockel, Walter ; Dawid, Herbert
Abstract
This thesis proves the existence of the spiral effect in different scenarios with different modeling approaches. With a spiral effect is called the hypothesis that if, due to his bargaining power, one buyer has better procurement conditions than other buyers, he can use them to strengthen his market position in the sales market, which in turn improve his procurement situation, e.g. as he is in a position to negotiate additional quantity discounts. The analysis is divided into three blocks. In "Asymmetric bargaining power in intermediate industry" we provide a model which extends the model of Katz (1987) to the case of the bargaining over the wholesale prices between firms who are Cournot competitors in the final market. We show that the asymmetry in the bargaining weights of downstream firms leads to the asymmetry in their wholesale prices and results in increasing concentration ratio and in increasing profitability of the most efficient firm. In "Asymmetric bargaining power in capacity-constrained industry" we extend the model of Kreps and Scheinkman (1983) allowing the costly capacities. We prove that for any capacity pair the capacity-constrained price game (with asymmetric capacity costs) has unique (mixed) equilibrium expected payoffs. In particular, if firms choose Cournot quantities as capacities, the resulting constrained capacity price game has a unique equilibrium outcome. We also analyze the existing literature on the capacity-constrained price game with asymmetric production costs and check whether this scenario may be incorporated into the prior formal bargaining model. If the asymmetry is not sufficiently high, firms choose Cournot quantities as capacities; if the asymmetry is sufficiently high, the more efficient firm has an incentive to choose the capacity above its Cournot level and price its less efficient rival out of the market. In "Dynamic duopoly with sticky prices and asymmetric production costs" we examine the corresponding differential game for different equilibrium concepts: open-loop, feedback - and closed-loop equilibria. We describe the dynamics and the characterization of the particular (stable) fixed points. We show that, similar to the symmetric case, prices in steady state open-loop- and feedback- equilibrium are lower than the prices in the static Cournot game. If the speed adjustment parameter falls then the prices and quantities in all three types of equilibrium converge to the prices and quantities of the static game when both firms act as price-takers. If the speed adjustment parameter grows the steady-state price in the open-loop equilibrium converges to the static Cournot equilibrium price, and feedback- and closed-loop equilibrium prices converge to the prices which are lower than the static Cournot price.
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Prog K. On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect. Bielefeld: Universität Bielefeld; 2012.
Prog, K. (2012). On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect. Bielefeld: Universität Bielefeld.
Prog, K. (2012). On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect. Bielefeld: Universität Bielefeld.
Prog, K., 2012. On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect, Bielefeld: Universität Bielefeld.
K. Prog, On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect, Bielefeld: Universität Bielefeld, 2012.
Prog, K.: On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect. Universität Bielefeld, Bielefeld (2012).
Prog, Kateryna. On the role of asymmetric bargaining power in intermediate industry for existence of spiral effect. Bielefeld: Universität Bielefeld, 2012.
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2012-06-25 14:55:28

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