Delay in Trade Networks
Thành Nguyen, Vijay Subramanian, Randall Berry
Operations Research · 2016 · Volume 64 · Issue 3
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.
Keywords
noncooperative bargaining, supply chain networks, trade volume
Enable JavaScript for citation tools and additional paper interactions.