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The Effects of Competition on Bargaining Power in Repeated Bilateral Negotiations
Groh, Christian
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URL:
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http://www.vwl.uni-mannheim.de/gk/wp/gkwp-1999-05....
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Dokumenttyp:
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Arbeitspapier
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Erscheinungsjahr:
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1999
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Titel einer Zeitschrift oder einer Reihe:
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GK Working Paper Series
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Band/Volume:
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99-05
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Ort der Veröffentlichung:
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Mannheim
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Graduiertenkolleg VWL/BWL
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Fachgebiet:
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330 Wirtschaft
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Abstract:
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I model a market with repeated bilateral negotiations, random matching and
an option to continue trade with the current partner. Sellers make all offers and
have a commonly known value of zero for the good, the buyers have a commonly
known value of one. While in a repeated bilateral monopoly situation a buyer
can extract all the surplus I show that alternative trading partners in form of
unmatched sellers are disadvantageous for the buyers. The result presumes that
traders have no information about other traders’ bargaining history. Starting
from that observation I allow buyers to compete for currently matched sellers.
Competition leads to harsh punishments for a buyer who accepts a seller’s outof-
equilibrium offer. Those harsh punishments ensure that buyers can offset the
negative effect which alternative trading partners induce: payoffs exceed those
without competition for any discount factor.
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