Zhang, X Z, Manchanda, P and Chu, J (2021) 'Meet me halfway': the value of bargaining. Marketing Science, 40 (6). pp. 1009-1216. ISSN 0732-2399
Abstract
Bargaining is an important pricing mechanism, prevalent in both online and offline markets. However, there is little empirical work documenting the costs and benefits of bargaining, primarily because of the lack of real-world bargaining data. We leverage rich, transaction-level bargaining data from a major online platform and supplement it with primary data to quantify the costs and benefits of bargaining for sellers, buyers, and the platform. We do this by building a structural model of buyer demand and seller pricing decisions while allowing for the existence of bargaining initiation cost, loss-of-face cost, and price discrimination. Using our results, we perform three policy simulations to quantify the importance of not distinguishing between no-bargain and failed-bargain transactions, ignoring the loss-of-face cost, and not allowing for bargaining. These simulations provide rich details on how the various costs of bargaining impact our understanding of buyer and seller behavior and transaction outcomes. Banning bargaining, in particular, benefits the buyer and the platform greatly but only has a modest benefit for sellers. Finally, we show that our results are robust to our assumptions and replicate in another product category.
More Details
Item Type: | Article |
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Subject Areas: | Marketing |
Additional Information: |
© 2021 INFORMS |
Funder Name: | Singapore Ministry of Education Science Social Research Thematic |
Date Deposited: | 05 Feb 2021 09:43 |
Date of first compliant deposit: | 04 Feb 2021 |
Subjects: |
China Pricing Bargaining theory |
Last Modified: | 18 Sep 2024 10:22 |
URI: | https://lbsresearch.london.edu/id/eprint/1673 |