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The impact of bargaining on markets with price takers: Too many bargainers spoil the broth.

Abstract:

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 do not b...

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Journal:
European Economic Review
Volume:
53
Issue:
6
Publication date:
2009-08-05
DOI:
URN:
uuid:e707800c-3bf5-439d-97e1-2a420fecb08c
Local pid:
oai:economics.ouls.ox.ac.uk:14360
Language:
English

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