Dynamic multilateral markets

We study dynamic multilateral markets, in which players' payoffs result from intra-coalitional bargaining. The latter is modeled as the ultimatum game with exogenous (time-invariant) recognition probabilities and unanimity acceptance rule. Players in agreeing coalitions leave the market and are replaced by their replicas, which keeps the pool of market participants constant over time. In this infinite game, we establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as the market frictions vanish

An empirical analysis of countervailing power in business-to-business bargaining

Pricing schemes in business-to-business (B2B) relationships reflect price discrimination and bargaining over rents. Bargaining outcomes are determined by upstream market power and countervailing buyer power downstream. This paper uses an exceptional panel of B2B transactions in the UK brick market to study B2B transaction prices. The empirical analysis identifies three effects on prices: nonlinear volume and freight absorption effects; countervailing power effects arising from buyers' local commercial significance; and competition effects due to the buyers' local potential suppliers. And it shows that small buyers benefit more from competition than large buyers because they are not constrained by the suppliers' capacity