11. Empirical Models of Bargaining with Externalities in IO and Trade

This chapter delves into empirical models of bargaining with externalities in industrial organization and trade, focusing on scenarios where agents with significant market power engage in pairwise negotiations. The Nash-in-Nash equilibrium concept is central to the discussion, offering a hybrid of cooperative and non-cooperative game theoretic solutions. Applications across various industries, such as media content and distribution, healthcare, and tariff determination in international trade, are explored. The chapter highlights the use of these models in counterfactual analysis, providing insights into policy questions and market dynamics. It also touches on the challenges and future directions in developing non-cooperative foundations for these models.