Oligopsony Meets Oligopoly:the Breakdown of Champion Negotiation in International Iron Ore Market
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| Title | Oligopsony Meets Oligopoly:the Breakdown of Champion Negotiation in International Iron Ore Market
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| Author | Hua Min and Xu Jing |
| Organization | School of Economics, Fudan University |
| Email | huamin@fudan.edu.cn; gemini_heidi@yahoo.cn |
| Key Words | Bilateral Oligopoly; Iron Ore Negotiation; Asymmetry Assumption |
| Abstract | We apply ‘uniform price auction model for multiple units’ to model the champion negotiation in international iron ore market. By releasing the symmetry assumption of the original model, we explain two facts: (1) why the yearly champion negotiation comes to an end; (2) why China, as a big and unified buyer, fails to get preferable price. Our model shows the asymmetry between contract price and spot price, involvement in ore mine investment and demand quantities bring the ‘negotiation breakdown point’ earlier to reach. As relative demand quantities and member of buyer negotiators enter the price formula symmetrically, we get the policy implication to remove qualification limit and to encourage middle-and-small-sized steel companies participate price negotiation by forming suitable sized group. |
| Serial Number | WP84 |
| Time | 2011-07-20 |
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