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The optimal marketing mix of posted prices, discounts and bargaining

Abstract:

In many markets firms set posted prices which are potentially negotiable. We analyze the optimal marketing mix of pricing and bargaining when price takers buy at posted prices but bargainers attempt to negotiate discounts. The optimal bargaining strategy involves the firms offering bargainers randomly-sized discounts. Competing firms keep posted prices high to weaken the bargainers' outside option, thus forgoing the chance to increase profits from price takers by undercutting their rival. ...

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Publication status:
Published

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Publisher:
University of Oxford Publisher's website
Series:
Department of Economics Discussion Paper Series
Publication date:
2010-02-01
Paper number:
479
Keywords:
Pubs id:
1143952
Local pid:
pubs:1143952
Deposit date:
2020-12-15

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