This paper studies bargaining in two-sided supply chain networks where manufacturers on the demand side purchase an input from suppliers on the supply side. A manufacturer and a supplier must have a business relationship or "link" to bargain and trade with each other. We show that valuation heterogeneity, supply-demand balance, and network structure are the main factors that influence the equilibrium prices, trading pattern, and surplus allocation. We demonstrate that bargaining effectively takes place in smaller sub-networks and develop a decomposition algorithm to identify into these sub-networks. We also study competitiveness and efficiency properties of general supply chain networks.
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