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Competition in Posted Prices With Bargaining

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  • David Gill
  • John Thanassoulis

Abstract

In 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 rival’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 Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 639.

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Date of creation: 14 Jan 2013
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Handle: RePEc:oxf:wpaper:639

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Keywords: Posted prices; list prices; collusion; bargaining; negotiation; haggling; discounts; outside option; price takers; Hotelling line;

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  1. Arnold, Michael A & Lippman, Steven A, 1998. "Posted Prices versus Bargaining in Markets with Asymmetric Information," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 450-57, July.
  2. David Spector, 2006. "Bundling, tying and collusion," PSE Working Papers halshs-00590553, HAL.
  3. Gabriele Camera & Cemil Selcuk, 2009. "Price Dispersion with Directed Search," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1193-1224, December.
  4. Chen, Yongmin & Rosenthal, Robert W, 1996. "Asking Prices as Commitment Devices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 129-55, February.
  5. repec:hal:wpaper:halshs-00590553 is not listed on IDEAS
  6. Wang, Ruqu, 1995. "Bargaining versus posted-price selling," European Economic Review, Elsevier, vol. 39(9), pages 1747-1764, December.
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