Price negotiation under uncertainty

When to buy or sell in supply chains with the presence of mergers

“…This result (See, e.g., Dixit, 1994 for an analysis of this result or Moon et al, 2011 for the detailed proof of this result) is displayed in Fig. 1.…”

“…Note that the firms in the supply chain face different, but correlated risk. This specification is generalized from the standard setting of one-dimensional geometric Brownian motion which is a good approximation for uncertainties (see, e.g., Dixit, 1989;Pindyck, 1991;Abel and Eberly, 1995;Murto, 2004) and can be used in the field of supply chains (Li and Kouvelis, 1999;Marathe and Ryan, 2005;Caldentey and Wein, 2006;Moon et al, 2011). Let σ 2 i ¼ σ 2 i1 þ σ 2 i2 denote the volatility of firm i's stochastic shock.…”

“…In a closely related paper, Moon et al (2011) displayed the importance of timing issue in a setting in which both seller's cost and buyer's revenue are uncertain, which implicates that the waiting opportunity costs should be reviewed as additional investment costs. Moon et al (2011) assumed that the revenue and the cost follow one-dimensional geometric Brownian motion, which is extended to two dimensions in our model.…”

“…Moon et al (2011) assumed that the revenue and the cost follow one-dimensional geometric Brownian motion, which is extended to two dimensions in our model. Based on the results of Moon et al (2011), we explore the timing issue in a setting that mergers occur in downstream firms or upstream firms, and analyze the impacts of mergers on deal timing.…”

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“…Wiltermuth and Neale (2011) found that negotiators that had information irrelevant for the negotiation about their negotiation counterpart were more likely to reach an impasse. Uncertainty in revenues and costs can result in a negotiation impasse (Moon, Yao, and Park 2011). For a negotiator, failing to reach an agreement in previous negotiations is likely to lead to an impasse in the negotiator's subsequent negotiations (O'Connor, Arnold and Burris 2005).…”