A Game Theory Analysis Of Bargaining Power In Oligopoly Market

Iron and steel industry is the pillar industry of national economy, which is of strategic importance to the socialist modernization. Iron ore is one of the basic and largest demanding smelting raw materials, whose price will influent the steel industry and national economic departments directly. As the biggest iron ore consumption and import country, China hasn't enjoyed the treatment which she should have. Year after year, China has been defeated in international iron ore price negotiations. The continuous rising price of iron ore has directly impacted the domestic market, steel and downstream industry, resulting in significant economic losses. Therefore, how to improve the bargaining power of iron ore has caused general concern of scholars home and abroad.Based on the status of production and trade of iron ore, we describe the plight of China's lack of pricing rights of iron ore through some charts and data after extensive reading. Then we give an overall analysis on iron ore supply and demand of the international pattern. After that, we conclude that the international iron ore trade has become a typical oligopoly market. And so, we give the method of how to improve the bargaining capacity of iron ore by using the game theory.According to theories and models of Oligopoly Market and the iron ore pricing mechanism, we construct the international iron ore price bargaining model after summarizing the bargaining theory of Nash, Rubinstein and Muthoo. We start with simple bilateral oligopoly model, then, gradually introduce three variables such as discount factor, incomplete information, and external threats. Then, we extract such three factors of international iron ore price negotiations as patience, extent of access to information and alternative payment and specifically detailed them after detailing on the introduction of the actual meaning. At last, we give a case study on international iron ore price negotiations in 2008.Finally, based on the above analyze and the actual situation in China, we propose several measures to improve our bargaining power. They are collapsing conspiracy, weakening the upstream power, increasing industrial concentration, establishing strategic reserves of iron ore stone, regulating iron ore trade order, enhancing information access and dissemination, diversifying iron ore import channels, improving recycling technology and establishing steel scrap futures market.