Abstract
We study decentralized markets involving producers and consumers that are facilitated by middlemen. We do this by analyzing a noncooperative networked bargaining game. We assume a complete information setup wherein all the agents know the structure of the network, the values of the consumers, and the transaction costs involved but allow for some search friction when either producers or consumers trade with middlemen. In such a setting, we show that sunk cost problems and a heterogeneous network can give rise to delay or failure in negotiation, and therefore reduce the total trade capacity of the network. In the limiting regime of extremely patient agents, we provide a sharp characterization of the trade pattern and the segmentation of these markets.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 646-661 |
| Number of pages | 16 |
| Journal | Operations Research |
| Volume | 64 |
| Issue number | 3 |
| DOIs | |
| State | Published - May 1 2016 |
Funding
The authors thank the associate editors and two anonymous referees for their insightful comments and suggestions. The first author's work was partly supported by the National Science Foundation [Grants AST-1343381 and AST-1443965]. The second author's work was partly supported by the National Science Foundation [Grants IIS-1538827, AST-1343381, and AST-1516075]. The third author's work was partly supported by the National Science Foundation [Grants IIS-1538827 and AST-1343381].
Keywords
- Noncooperative bargaining
- Supply chain networks
- Trade volume
ASJC Scopus subject areas
- Computer Science Applications
- Management Science and Operations Research