English, Article, Journal or magazine article edition: Too Many Bargainers Spoil The Broth: The Impact of Bargaining on Markets with Price Takers David Gill; John Thanassoulis

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Too Many Bargainers Spoil The Broth: The Impact of Bargaining on Markets with Price Takers
Author
  • David Gill
  • John Thanassoulis
Physical Description
  • preprint
Notes
  • In this paper we study how bargainers impact on markets in which firms set a list price to sell to those consumers who take prices as given. The list price acts as an outside option for the bargainers, so the higher the list price, the more the firms can extract from bargainers. We find that an increase in the proportion of consumers seeking to bargain can lower consumer surplus overall, even though new bargainers receive a lower price. The reason is that the list price for those who don`t bargain and the bargained prices for those who were already bargaining rise: sellers have a greater incentive to make the bargainers` outside option less attractive, at a cost to profits from non-bargainers. Competition Authority exhortations to bargain can therefore be misplaced. We also consider the implications for optimal seller bargaining.
  • Bargaining, Price Takers, List Price, Consumer Surplus
  • RePEc:oxf:wpaper:329
Language
  • English
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