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When to Haggle

Author

Listed:
  • Miller, Nolan

    (Harvard U)

  • Piankov, Nikita

    (Harvard U)

  • Zeckhauser, Richard

    (Harvard U)

Abstract

A seller faces a buyer with unknown reservation value. We show that buyer risk aversion can make it in the seller's interest to haggle. That is, the seller should make an initial offer and then, if it is rejected, make a second offer with some probability strictly less than one. This is true regardless of whether the seller haggles over price, quality, or price and quality simultaneously. The results are extended to contexts with multiple types of buyers and multiple dimensions for haggling.

Suggested Citation

  • Miller, Nolan & Piankov, Nikita & Zeckhauser, Richard, 2001. "When to Haggle," Working Paper Series rwp01-025, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp01-025
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    File URL: https://research.hks.harvard.edu/publications/getFile.aspx?Id=15
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    References listed on IDEAS

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    1. Rosen, Sherwin & Rosenfield, Andrew M, 1997. "Ticket Pricing," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 351-376, October.
      • Rosen, Sherwin & Rosenfield, Andy, 1995. "Ticket Pricing," Working Papers 120, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    2. John G. Riley & Richard Zeckhauser, 1980. "Optimal Selling Strategies:," UCLA Economics Working Papers 180, UCLA Department of Economics.
    3. Matthews, Steven A., 1983. "Selling to risk averse buyers with unobservable tastes," Journal of Economic Theory, Elsevier, vol. 30(2), pages 370-400, August.
    4. Maskin, Eric S & Riley, John G, 1984. "Optimal Auctions with Risk Averse Buyers," Econometrica, Econometric Society, vol. 52(6), pages 1473-1518, November.
    5. Spence, Michael, 1977. "Nonlinear prices and welfare," Journal of Public Economics, Elsevier, vol. 8(1), pages 1-18, August.
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    Cited by:

    1. Hanming Fang & Peter Norman, 2006. "To bundle or not to bundle," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 946-963, December.
    2. Henriet, Dominique & Henry, Claude & Rey, Patrick & Rochet, Jean-Charles, 1987. "Intérêt public, intérêt privé et discrimination," L'Actualité Economique, Société Canadienne de Science Economique, vol. 63(2), pages 98-117, juin et s.
    3. Yongmin Chen & Ruqu Wang, 2004. "Equilibrium Selling Mechanisms," Annals of Economics and Finance, Society for AEF, vol. 5(2), pages 335-355, November.

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