Break-up fees and bargaining power in sequential contracting

Shaffer, Greg and Marx, Leslie M. (2010) Break-up fees and bargaining power in sequential contracting. International Journal of Industrial Organization, 28 (5). pp. 451-463. ISSN 0167-7187

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When a buyer negotiates in sequence with two potential sellers of a good, the outcome of each negotiation depends on all three players' bargaining powers. Assuming all parties are symmetrically informed, we find that the first seller's payoff is increasing in his own and the second seller's bargaining power. On the other hand, the second seller's payoff is decreasing in the first seller's bargaining power and, in some cases, also in his own bargaining power. We characterize when contracts will contain break-up fees. All results extend to the case of a seller negotiating in sequence with two buyers.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Nicola Secker
Date Deposited: 01 Apr 2011 08:07
Last Modified: 12 Jan 2024 01:20
DOI: 10.1016/j.ijindorg.2009.11.001

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