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Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions

Author

Listed:
  • Arnold Michael A.

    (University of Delaware)

  • Pénard Thierry

    (University of Rennes 1)

Abstract

This paper develops a model of oligopolistic price competition to analyze the impact of online intermediaries such as Autobytel.com on the price setting process in the automobile market. The roles of dealer search costs, the fraction of buyers using the intermediary, the value of the item being sold, and heterogeneity in buyer bargaining abilities are explored. The model provides theoretical insights relevant to the empirical literature addressing the role that intermediaries like Autobytel play in online markets. For example, we present conditions under which the price offered through the intermediary is either higher or lower than offline (bargained) prices.

Suggested Citation

  • Arnold Michael A. & Pénard Thierry, 2007. "Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions," Review of Network Economics, De Gruyter, vol. 6(2), pages 1-27, June.
    • Handle: RePEc:bpj:rneart:v:6:y:2007:i:2:n:4
    DOI: 10.2202/1446-9022.1114
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    Cited by:

    1. Ghafele, Roya & Gibert, Benjamin, 2011. "The transformative impact of business models," MPRA Paper 38346, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L89 - Industrial Organization - - Industry Studies: Services - - - Other

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