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The Ability of Nash's Theory of Cooperative Games to Predict the Outcomes of Buyer-Seller Negotiations: A Dyad-Level Test

Author

Listed:
  • Scott A. Neslin

    (Amos Tuck School of Business Administration, Dartmouth College, Hanover, New Hampshire 03755)

  • Leonard Greenhalgh

    (Amos Tuck School of Business Administration, Dartmouth College, Hanover, New Hampshire 03755)

Abstract

This research develops and implements a dyad-level procedure for testing whether the outcomes of buyer-seller negotiations correspond to settlements prescribed by Nash's theory of cooperative games. The procedure entails a multivariate statistical test in which some parameters are estimated by simulation, while others are provided directly from the assessment of negotiator utility functions by means of conjoint analysis. The procedure is applied to an experiment in which subjects participated in a realistic role-playing exercise that replicated the purchase of television advertising time. Results indicate that at the 0.01 significance level, 57.8% of the dyads can be rejected as not having achieved Nash solutions. These results, and their implications for marketing practitioners as well as future research, are discussed.

Suggested Citation

  • Scott A. Neslin & Leonard Greenhalgh, 1986. "The Ability of Nash's Theory of Cooperative Games to Predict the Outcomes of Buyer-Seller Negotiations: A Dyad-Level Test," Management Science, INFORMS, vol. 32(4), pages 480-498, April.
    • Handle: RePEc:inm:ormnsc:v:32:y:1986:i:4:p:480-498
    DOI: 10.1287/mnsc.32.4.480
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    Cited by:

    1. Xu Zhang & Puneet Manchanda & Junhong Chu, 2021. "“Meet Me Halfway”: The Costs and Benefits of Bargaining," Marketing Science, INFORMS, vol. 40(6), pages 1081-1105, November.
    2. Yuxin Chen & Sha Yang & Ying Zhao, 2008. "A Simultaneous Model of Consumer Brand Choice and Negotiated Price," Management Science, INFORMS, vol. 54(3), pages 538-549, March.
    3. Preyas S. Desai & Devavrat Purohit, 2004. "“Let Me Talk to My Manager”: Haggling in a Competitive Environment," Marketing Science, INFORMS, vol. 23(2), pages 219-233, August.
    4. Haresh Gurnani & Mengze Shi, 2006. "A Bargaining Model for a First-Time Interaction Under Asymmetric Beliefs of Supply Reliability," Management Science, INFORMS, vol. 52(6), pages 865-880, June.
    5. Anocha Aribarg & Neeraj Arora & Moon Young Kang, 2010. "Predicting Joint Choice Using Individual Data," Marketing Science, INFORMS, vol. 29(1), pages 139-157, 01-02.

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    Keywords

    marketing; channels; game theory;
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