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Posted Prices versus Bargaining in Markets with Asymmetric Information

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  • Arnold, Michael A
  • Lippman, Steven A

Abstract

A search model is employed to analyze the choice between posting a price and bargaining for the seller of an asset who is imperfectly informed about both buyer valuations and buyer bargaining abilities. A mean preserving increase in risk of buyer valuations is relevant, and beneficial, to the seller; however, only the mean, and not the distribution, of buyer bargaining abilities is relevant. If the mean of buyer bargaining abilities is sufficiently high, the seller utilizes a posted price. Interestingly, social welfare decreases in the mean of buyer bargaining abilities; while an increase in the mean of buyer bargaining abilities reduces expected search costs, it also results in misallocation of the good because the seller is less discriminating. Copyright 1998 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 36 (1998)
Issue (Month): 3 (July)
Pages: 450-57

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Handle: RePEc:oup:ecinqu:v:36:y:1998:i:3:p:450-57

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Cited by:
  1. Kuo, Chia-Wei & Huang, Kwei-Long, 2012. "Dynamic pricing of limited inventories for multi-generation products," European Journal of Operational Research, Elsevier, vol. 217(2), pages 394-403.
  2. David Gill & John Thanassoulis, 2013. "Competition in Posted Prices With Stochastic Discounts," Economics Series Working Papers 682, University of Oxford, Department of Economics.
  3. Masui, Makoto, 2011. "Jobs with different wage determination mechanisms, social efficiency and unemployment," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 56-75, March.
  4. Michael A. Arnold & Thierry Pénard, 2007. "Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions," Working Papers 07-03, University of Delaware, Department of Economics.
  5. Alexander Raskovich, 2006. "Ordered Bargaining," EAG Discussions Papers 200610, Department of Justice, Antitrust Division.
  6. Gantner, Anita, 2008. "Bargaining, search, and outside options," Games and Economic Behavior, Elsevier, vol. 62(2), pages 417-435, March.
  7. John Thanassoulis & David Gill, 2010. "The Optimal Marketing Mix of Posted Prices, Discounts and Bargaining," Economics Series Working Papers 479, University of Oxford, Department of Economics.
  8. Homburg, Christian & Allmann, Jan & Klarmann, Martin, 2014. "Internal and external price search in industrial buying: The moderating role of customer satisfaction," Journal of Business Research, Elsevier, vol. 67(8), pages 1581-1588.
  9. Anita Gantner, 2007. "Bargaining, Search, and Outside Options," Working Papers 2007-16, Faculty of Economics and Statistics, University of Innsbruck.
  10. Camera, G. & Delacroix, A., 2001. "Bargaining or Price Posting?," Purdue University Economics Working Papers 1147, Purdue University, Department of Economics.
  11. Egil Kjerstad, 2005. "Auctions vs negotiations: a study of price differentials," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1239-1251.
  12. Gill, David & Thanassoulis, John, 2009. "The impact of bargaining on markets with price takers: Too many bargainers spoil the broth," European Economic Review, Elsevier, vol. 53(6), pages 658-674, August.
  13. Raskovich, Alexander, 2007. "Ordered bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1126-1143, October.
  14. Koye Somefun, 2001. "Posted Offer versus Bargaining: An Example of how Institutions can Facilitate Learning," Computing in Economics and Finance 2001 79, Society for Computational Economics.
  15. Richard Mash, 2000. "Host Country-Foreign Investor Bargaining Power and Investment Incentive Provisions in Multilateral Investment Agreements," Economics Series Working Papers 47, University of Oxford, Department of Economics.
  16. Robert Clark & Jason Allen & Jean-Francois Houde, 2010. "Price negotiation in differentiated product markets: An analysis of the market for insured mortgages in Canada," 2010 Meeting Papers 1072, Society for Economic Dynamics.
  17. David Gill & John Thanassoulis, 2013. "Competition in Posted Prices With Bargaining," Economics Series Working Papers 639, University of Oxford, Department of Economics.

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