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Preliminary Bargaining versus Posted Price Competition in Customer Markets

By Timothy N. Cason, Daniel Friedman and Garrett H. Milam

Abstract

We compare posted price and bilateral bargaining (or “haggle”) market institutions in 12 pairs of laboratory markets. Each market runs 50-75 periods in a customer market environment, where buyers incur a cost to switch sellers. Costs evolve following a random walk process. Coasian and New Institutionalist traditions provide competing conjectures on relative market performance. We find that efficiency is lower, sellers price higher, and prices are stickier under haggle than under posted offer. Acknowledgements: We thank the NSF for funding the work under grants SBR-9617917 and SBR-9709874; Brian Eaton for programming assistance, and Alessandra Cassar, Svetlana Pevnitskya and Sujoy Chakravarty for help in running the experimental sessions. Than

Year: 2000
OAI identifier: oai:CiteSeerX.psu:10.1.1.196.6920
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