Ordered bargaining

Abstract

When buyers choose the order in which they bargain with suppliers of known characteristics, prices are determined jointly by bargaining power and competitive intensity (the outside option to bargain with rival suppliers). Bargaining power becomes less important to the outcome as competition intensifies; prices fall to marginal cost in the limit. With positive visit costs and weak competition, some buyer power is necessary for trade. Incomplete buyer power may lead to inefficient choice of bargaining order. The robustness of ordered bargaining to the possibility of price posting and auctions, and welfare properties of these alternative pricing institutions, are also explored.

On the role of confidentiality and deadlines in bilateral negotiations

“…Marshall and Merlo (2004), and Marx and Shaffer (2007) let the buyer choose the order, but assume contingent and public contracts. Raskovich (2007) uses a costly search model in which all offers are exploding and the buyer exits upon a successful trade.…”

“…Sequentiality, however, should not be taken literally, because some sequential negotiations in our framework will be strategically equivalent to simultaneous ones. 6 This is a convenient way of parameterizing the distribution of bargaining power, and widely used in similar negotiation models, e.g., Shaffer (2007, 2010), and Raskovich (2007). We further discuss its relation to a two-stage bargaining protocol in the next section.…”

On the Role of Confidentiality and Deadlines in Bilateral Negotiations

“…Also, we let φ 1 ∈ {0, 1} be the upstream trade outcome and ρ 1 ∈ {s 1 , s 2 , b} be the upstream proposer. 8 The extensive form of our basic negotiation game proceeds 5 This is a convenient way of parameterizing the distribution of bargaining power, and widely used in similar negotiation models, e.g., Shaffer (2007, 2010), and Raskovich (2007). We further discuss its relation to a two-stage bargaining protocol in the next section.…”

“…Marshall and Merlo (2004), and Marx and Shaffer (2007) let the buyer choose the order, but assume contingent and public contracts. Raskovich (2007) uses a costly search model in which all offers are exploding and the buyer exits upon a successful trade.…”

Price Authority under Competing Organizations

“…In this context, we …nd that industry pro…t maximization may well require principals to grant agents full pricing discretion, even though this discretion would be constrained by the presence of list prices in a non-cooperative equilibrium. Gill and Thanassoulis (2016) also consider upstream cooperation but, in contrast to Harrington and Ye (2017), assume that …rms can coordinate on both list and transaction prices because both are veri…able (see also Raskovich, 2007, Lester et al, 2015, and Mallucci et al, 2019. In these models, coordination on transaction prices is viable because they do not consider privately informed salespeople; in our model, instead, coordination on transaction prices is feasible only when principals give up the bene…ts of ‡exibility.…”