Alternating bid bargaining with a smallest money unit

Damme, E.E.C. van; Selten, Reinhard; Winter, Eyal

doi:10.1016/0899-8256(90)90029-t

Cited by 95 publications

(26 citation statements)

References 3 publications

(2 reference statements)

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“…For example, Rubinstein's full information bargaining problem of dividing a pie of 1 between 2 players can be shown to have one perfect equilibrium. However, multiple equilibria arise, if the pie is an amount of money denominated in discrete units (van Damme et al 1990). Sutton (1986) illustrates that Rubinstein's game does also not provide a unique equilibrium when a third player is introduced.…”

Section: Related Literaturementioning

confidence: 99%

Online Haggling at a Name-Your-Own-Price Retailer: Theory and Application

2005

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We present a formal model of haggling between a name-your-own-price retailer and a set of individual buyers. Rather than posting a price, the retailer waits for potential buyers to submit offers for a given product and then chooses to either accept or reject them. Consumers whose offers have been rejected can invest in additional haggling effort and increment their offers. This pricing model allows the name-your-own-price retailer to engage in price discrimination: As haggling is costly for the potential buyer, customers with a high willingness to haggle will achieve lower transaction prices. However, because haggling is costly, it reduces overall welfare and diminishes the benefits of price discrimination. Our study is motivated by several name-your-own-price retailers that have recently emerged on the Internet. Based on detailed transaction data of a large German name-your-own-price retailer, we present a model of consumer haggling. We then show how this model can be used to improve the decision making of the retailer, who needs to choose a threshold price above which all offers are accepted. Another decision variable for the retailer lies in the user interface design, which allows the retailer to either facilitate or to hinder the haggling of the consumer. AbstractWe present a formal model of haggling between a name-your-own-price retailer and a set of individual buyers. Rather than posting a price, the retailer waits for potential buyers to submit offers for a given product and then chooses to either accept or reject them. Consumers whose offers have been rejected can invest in additional haggling effort and increment their offers. The main advantage of this pricing model is that it allows the name-your-own-price retailer to engage in price discrimination: as haggling is costly for the potential buyer, customers with a high willingness to haggle will achieve lower transaction prices. Thus, haggling effort can be used as a self-selection mechanism to implement price discrimination. Our study is motivated by several name-your-own-price retailers that have recently emerged on the Internet. Based on detailed transaction data of a large German name-yourown-price retailer, we present a model of consumer haggling. We then show how this model can be used to improve the decision making of the retailer, who needs to choose a threshold price above which all offers are accepted. Another decision variable for the retailer lies in the user interface design, which allows the retailer to either facilitate or to hinder the haggling of the consumer.

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Section: Related Literaturementioning

confidence: 99%

Online Haggling at a Name-Your-Own-Price Retailer: Theory and Application

2005

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“…But, in any stage, all previous moves are assumed to be known to every player. 4 Clearly, this is not so if this player plays against Nature or if other players have a dominant strategy. Then a coarse partitioning has the sole effect of making this player 's choice of strategy possibly suboptimal without affecting the behaviors of others.…”

Section: Introductionmentioning

confidence: 99%

Analogy-based expectation equilibrium

Jéhiel

2005

Journal of Economic Theory

329

216

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It is assumed that players bundle nodes in which other players must move into analogy classes, and players only have expectations about the average behavior in every class. A solution concept is proposed for multi-stage games with perfect information: at every node players choose best-responses to their analogy-based expectations, and expectations are correct on average over those various nodes pooled together into the same analogy classes. The approach is applied to a variety of games. It is shown that a player may beneÞt from having a coarse analogy partitioning. And for simple analogy partitioning,(1) initial cooperation followed by an end opportunistic behavior may emerge in the Þnitely repeated prisoner's dilemma (or in the centipede game), (2) an agreement need not be reached immediately in bargaining games with complete information.

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“…All we can say is that the numerical values differ by less than the precision of the algorithm itself (.01). 25 For a discussion on the appropriateness of a finite set of agreements see van Damme et al (1990). 26 This concords with the observation that the higher the stakes of a negotiation the higher are the units used.…”

Section: Discussionmentioning

confidence: 72%

“…15 We remark that, by changing the values of the parameter s L 1 , the domain where system (13) is meaningful changes as well. In other words, for a given s L 1 , system (13) has no meaning when ϕ k…”

Section: Existence and Uniquenessmentioning

confidence: 94%

Mediation: incomplete information bargaining with filtered communication

Jarque

Ponsatı́

Sákovics

2003

Journal of Mathematical Economics

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We analyze a continuous-time bilateral double auction in the presence of two-sided incomplete information and a smallest money unit. A distinguishing feature of our model is that intermediate concessions are not observable by the adversary: they are only communicated to a passive auctioneer.An alternative interpretation is that of mediated bargaining. We show that an equilibrium using only the extreme agreements always exists and display the necessary and sufficient condition for the existence of (perfect Bayesian) equilibra which yield intermediate agreements. For the symmetric case with uniform type distribution we numerically calculate the equilibria. We find that the equilibrium which does not use compromise agreements is the least efficient, however, the rest of the equilibria yield the lower social welfare the higher number of compromise agreements are used.

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Alternating bid bargaining with a smallest money unit

Cited by 95 publications

References 3 publications

Online Haggling at a Name-Your-Own-Price Retailer: Theory and Application

Online Haggling at a Name-Your-Own-Price Retailer: Theory and Application

Analogy-based expectation equilibrium

Mediation: incomplete information bargaining with filtered communication

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