Browsing by Subject "Bargaining"

The purpose of this thesis is to gain insight into the effects of different transaction and price setting methods and network structures in an intermediation network setting on profit allocation between their agents. The paper will be formulated as a literature review, and while every discussed intermediation model is not covered in detail, the goal is still to provide a clear outline on the topic. The focus is mostly in network models with exogenously determined connections between agents that restrict the trade, although search models, where the trade is restricted by randomizing the encounters between agents, are also discussed. The presented models are divided into three categories based on the restrictions placed on their intermediaries. First, we will look at models where intermediaries are not allowed to trade with each other. Next are models where intermediaries are allowed to trade with each other, causing intermediation chains to form. Lastly, we look at models where intermediaries are not exogenously separated from buyers. We will see that the results of intermediation network models are very sensitive to changes in the models' premises. Two largest contributors to the profit distribution between the agents in the models are the way the bargaining game between trading partners is modelled and how connections between agents in the model are restricted, which is directly tied to the restrictions on the trading partners of the intermediaries. The former on the other hand splits the models roughly into two categories, one utilizing a predetermined surplus split between the trade partners and the other using a strategic bargaining game. A pre-determined surplus split, depending on how even it is, usually favours agents further along the chain. The results of having a strategic bargaining game are largely dependent on positions of the agents in the network, where agents who can exploit competition between other agents can usually extract higher profits. In some models, the ability of intermediaries to make a positive profit is also tied to their necessity for the efficiency of the trade.