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Competition in Posted Prices With Bargaining

  • David Gill
  • John Thanassoulis

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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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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  1. repec:hal:wpaper:halshs-00590553 is not listed on IDEAS
  2. Camera, Gabriele & Selcuk, Cemil, 2004. "Price Dispersion with Directed Search," Purdue University Economics Working Papers 1173, Purdue University, Department of Economics.
  3. Yongmin Chen & Robert W. Rosenthal, 1993. "Asking Prices as Commitment Devices," Papers 0042, Boston University - Industry Studies Programme.
  4. Spector, David, 2007. "Bundling, tying, and collusion," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 575-581, June.
  5. Wang, Ruqu, 1995. "Bargaining versus posted-price selling," European Economic Review, Elsevier, vol. 39(9), pages 1747-1764, December.
  6. 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.
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