Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration
Publication
, Journal Article
Loertscher, S; Marx, LM
Published in: American Economic Review
February 1, 2022
We provide an incomplete information bargaining framework that captures the effects of differential bargaining power in markets with multiple buyers and multiple suppliers. The market is modeled as a mechanism that maximizes the expected weighted welfare of the firms, subject to the constraints of incentive compatibility, individual rationality, and no deficit. We show that, in this model, there is no basis for the presumption that vertical integration increases equally weighted social surplus, while it is possible that horizontal mergers that appropriately change bargaining weights increase social surplus. Moreover, efficient bargaining implies that in equilibrium noncontractible investments are efficient.
Duke Scholars
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Published In
American Economic Review
DOI
EISSN
1944-7981
ISSN
0002-8282
Publication Date
February 1, 2022
Volume
112
Issue
2
Start / End Page
616 / 649
Related Subject Headings
- Economics
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 14 Economics
Citation
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Loertscher, S., & Marx, L. M. (2022). Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration. American Economic Review, 112(2), 616–649. https://doi.org/10.1257/AER.20201092
Loertscher, S., and L. M. Marx. “Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration.” American Economic Review 112, no. 2 (February 1, 2022): 616–49. https://doi.org/10.1257/AER.20201092.
Loertscher S, Marx LM. Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration. American Economic Review. 2022 Feb 1;112(2):616–49.
Loertscher, S., and L. M. Marx. “Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration.” American Economic Review, vol. 112, no. 2, Feb. 2022, pp. 616–49. Scopus, doi:10.1257/AER.20201092.
Loertscher S, Marx LM. Incomplete Information Bargaining with Applications to Mergers, Investment, and Vertical Integration. American Economic Review. 2022 Feb 1;112(2):616–649.
Published In
American Economic Review
DOI
EISSN
1944-7981
ISSN
0002-8282
Publication Date
February 1, 2022
Volume
112
Issue
2
Start / End Page
616 / 649
Related Subject Headings
- Economics
- 38 Economics
- 35 Commerce, management, tourism and services
- 15 Commerce, Management, Tourism and Services
- 14 Economics