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When the Price You See Is Not the Price You Get: A Bargaining Study

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Abstract

Although (or because) it is uncommon to observe consumers bargaining at retail stores in the Western world, the circumstances under which retail firms are actually willing to bargain is largely unknown. We construct a theoretical model in order to better understand how price and firm characteristics influence a firm's incentives to bargain and test the model's predictions by conducting a field experiment at nearly 300 stores throughout Vienna, Austria. In particular, we analyze the extent to which retail firms throughout Vienna consent to granting a discount when asked. A discount was granted approximately 40% of the time, and the average positive discount was approximately 10% off of a product's posted price. We relate firms' willingness to bargain to price and firm characteristics, in line with our theory.

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  • Sandro Shelegia & Joshua Sherman, 2014. "When the Price You See Is Not the Price You Get: A Bargaining Study," Vienna Economics Papers vie1410, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie1410
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    Cited by:

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    4. Matthew Backus & Tom Blake & Steven Tadelis, 2015. "Cheap Talk, Round Numbers, and the Economics of Negotiation," NBER Working Papers 21285, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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