Competition in Posted Prices With Bargaining
AbstractIn this paper we study price competition between firms when some consumers attempt tobargain while others buy at the public list or posted prices. Even though bargainers succeed innegotiating discounts off the list prices, their presence dampens competitive pressure in the marketby reducing the incentive to undercut a rivalâ€™s list price, thus raising all prices and increasingprofits. Welfare falls because of the uncertainty in the bargaining process, which generates somemisallocation of products to consumers. We also find that the bargainers facilitate collusion byreducing the market share that can be gained from a deviation.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 639.
Date of creation: 14 Jan 2013
Date of revision:
Posted prices; list prices; collusion; bargaining; negotiation; haggling; discounts; outside option; price takers; Hotelling line;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-02-03 (All new papers)
- NEP-BEC-2013-02-03 (Business Economics)
- NEP-COM-2013-02-03 (Industrial Competition)
- NEP-GTH-2013-02-03 (Game Theory)
- NEP-MKT-2013-02-03 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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