Bargaining and Exclusion With Multiple Buyers

Dilip Abreu, Mihai Manea

    Research output: Contribution to journalArticlepeer-review


    A seller trades with q out of n buyers who have valuations a1 ≥ a2 ≥ ⋯ ≥ an > 0 via sequential bilateral bargaining. When q < n, buyer payoffs vary across equilibria in the patient limit, but seller payoffs do not, and converge to (Formula presented.) If l* is the (generically unique) maximizer of this optimization problem, then each buyer i < l* trades with probability 1 at the fair price ai/2, while buyers i ≥ l* are excluded from trade with positive probability. Bargaining with buyers who face the threat of exclusion is driven by a sequential outside option principle: the seller can sequentially exercise the outside option of trading with the extra marginal buyer q + 1, then with the new extra marginal buyer q, and so on, extracting full surplus from each buyer in this sequence and enhancing the outside option at every stage. A seller who can serve all buyers (q = n) may benefit from creating scarcity by committing to exclude some remaining buyers as negotiations proceed. An optimal exclusion commitment, within a general class, excludes a single buyer but maintains flexibility about which buyer is excluded. Results apply symmetrically to a buyer bargaining with multiple sellers.

    Original languageEnglish (US)
    Pages (from-to)429-465
    Number of pages37
    Issue number2
    StatePublished - Mar 2024

    ASJC Scopus subject areas

    • Economics and Econometrics


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