NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

"Nash-in-Nash" Bargaining: A Microfoundation for Applied Work

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

NBER Working Paper No. 20641
Issued in October 2014, Revised in June 2017
NBER Program(s):Industrial Organization

A “Nash equilibrium in Nash bargains” has become a workhorse bargaining model in applied analyses of bilateral oligopoly. This paper proposes a non-cooperative foundation for “Nash-in-Nash” bargaining that extends the Rubinstein (1982) 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”—i.e., 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.

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Document Object Identifier (DOI): 10.3386/w20641

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