Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142251
Authors: 
Aghadadashli, Hamid
Dertwinkel-Kalt, Markus
Wey, Christian
Year of Publication: 
2016
Series/Report no.: 
DICE Discussion Paper 224
Abstract: 
We re-examine the Nash bargaining solution when an upstream and a downstream firm bargain over a linear input price. We show that the profit sharing rule is given by a simple and instructive formula which depends on the parties' disagreement payoffs, the profit weights in the Nash-product and the elasticity of derived demand. A downstream firm's profit share increases in the equilibrium derived demand elasticity which in turn depends on the final goods' demand elasticity. Our simple formula generalizes to bargaining with N downstream firms when bilateral contracts are unobservable.
Subjects: 
Nash Bargaining
Demand Elasticity
JEL: 
L13
ISBN: 
978-3-86304-223-3
Document Type: 
Working Paper

Files in This Item:
File
Size
383.79 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.