American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Searching for a Bargain: Power of Strategic Commitment
American Economic Journal: Microeconomics
vol. 7,
no. 1, February 2015
(pp. 320–53)
Abstract
This paper shows that in a multilateral bargaining setting where the sellers compete á la Bertrand, a range of prices that includes the monopoly price and 0 are compatible with equilibrium, even in the limit where the reputational concerns and frictions vanish. In particular, the incentive of committing to a specific demand, the opportunity of building reputation about inflexibility, and the anxiety of preserving their reputation can tilt players' bargaining power in such a way that being deemed as a tough bargainer is bad for the competing players, and thus, price undercutting is not optimal for the sellers. (JEL C78, D43, D83)Citation
Özyurt, Selçuk. 2015. "Searching for a Bargain: Power of Strategic Commitment." American Economic Journal: Microeconomics, 7 (1): 320–53. DOI: 10.1257/mic.20130027Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
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