Equilibrium Contracts In a Bilateral Monopoly with Unequal Bargaining Powers

Abstract

Real-world bilateral monopolies often indicate that one party exercises slightly

Superior bargaining power than the other party. We analyze long-term, cooperative

Contracts in bilateral monopolies with unequal bargaining powers. We assume that the

Two parties bargain for a determinate price and quantity of the intermediate product by

Optimizing a joint objective which takes into account the profits and bargaining power of

Each party. We use a Bowley price leadership model to develop the multi-period

Contracts and derive conditions that induce a Nash equilibrium at the jointly determined

Points of operation. [C71,C78]

^*Authors acknowledge the helpful comments of an anonymous reviewer. This paper is Based upon work partially supported by the Cooperative State Research, Education, and Extension Service of U.S. Department of Agriculture, under Agreement No 00-35400-9202

^*Authors acknowledge the helpful comments of an anonymous reviewer. This paper is Based upon work partially supported by the Cooperative State Research, Education, and Extension Service of U.S. Department of Agriculture, under Agreement No 00-35400-9202

Notes

^*Authors acknowledge the helpful comments of an anonymous reviewer. This paper is Based upon work partially supported by the Cooperative State Research, Education, and Extension Service of U.S. Department of Agriculture, under Agreement No 00-35400-9202