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Some factors affecting demand withholding in posted-offer markets

Author

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  • Bradley J. Ruffle

    (Department of Economics, P.O. Box 653, Ben-Gurion University, Beer Sheva, 84105, ISRAEL)

Abstract

Both oligopoly theory and experiments are concerned almost uniquely with sellers' behavior. Buyers' ability to exhibit non-trivial behavior in different market institutions remains unaddressed. This paper investigates the impact of three variables (number of buyers, surplus division at the market-clearing price and information revelation) on strategic and fairness-motivated demand withholding. Demand withholding and its ability to force lower prices increase as the number of buyers or the share of surplus earned by the buyers decreases. However, increasing the information revealed to subjects about the surplus inequality favoring sellers mildly facilitates collusion among sellers rather than provoking demand withholding as conjectured.

Suggested Citation

  • Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 529-544.
    • Handle: RePEc:spr:joecth:v:16:y:2000:i:3:p:529-544
    Note: Received: March 27, 1999; revised version: October 26, 1999
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    More about this item

    Keywords

    Strategic buyer behavior; Demand withholding; Fairness; Reference profit.;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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