“Nash-in-Nash” Bargaining: A Microfoundation for Applied Work

Allan Collard-Wexler, Gautam Gowrisankaran, Robin S. Lee

Research output: Contribution to journalArticle

14 Scopus citations

Abstract

A “Nash equilibrium in Nash bargains” has become a workhorse bargaining model in applied analyses of bilateral oligopoly. This paper proposes a noncooperative foundation for “Nash-in-Nash” bargaining that extends Rubinstein’s alternating offers model to multiple upstream and downstream firms. We provide conditions on firms’ marginal contributions under which there exists, for sufficiently short time between offers, an equilibrium with agreement among all firms at prices arbitrarily close to Nash-in-Nash prices, that is, each pair’s Nash bargaining solution given agreement by all other pairs. Conditioning on equilibria without delayed agreement, limiting prices are unique. Unconditionally, they are unique under stronger assumptions.

Original languageEnglish (US)
Pages (from-to)163-195
Number of pages33
JournalJournal of Political Economy
Volume127
Issue number1
DOIs
StatePublished - Feb 1 2019

ASJC Scopus subject areas

  • Economics and Econometrics

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