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Title: Centralized bargaining with pre-donation in a vertically related industry
Authors: Sağlam, İsmail
Keywords: nash bargaining
vertically related industry
Vs. Quantity Competition
Issue Date: 2023
Publisher: Wiley
Abstract: This paper studies the incentives for, and the welfare effects of, pre-donation in a vertically related industry where two downstream firms that produce a homogenous good jointly bargain, using the generalized Nash rule, with an upstream firm over a linear input price before they engage in Cournot competition. We theoretically show that the downstream industry has no incentive to make any pre-donation and this is irrespective of its bargaining power and also irrespective of whether it is a monopoly or a symmetric or asymmetric duopoly. Also, irrespective of the said structures of the downstream industry, we show computationally that (i) the upstream firm finds to make unilateral pre-donation optimal if and only if its bargaining power is sufficiently small and (ii) its optimal pre-donation (whenever positive) always yields Pareto welfare gains.
ISSN: 1463-6786
Appears in Collections:Scopus İndeksli Yayınlar Koleksiyonu / Scopus Indexed Publications Collection
WoS İndeksli Yayınlar Koleksiyonu / WoS Indexed Publications Collection

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