How Well Does Bargaining Work in Consumer Markets? A Robust Bounds Approach

58 Pages Posted: 30 Aug 2021 Last revised: 17 Apr 2022

See all articles by Bradley Larsen

Bradley Larsen

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); eBay Research Labs

Joachim Freyberger

University of Bonn; University of Wisconsin - Madison

Date Written: August 2021

Abstract

This study provides a structural analysis of detailed, alternating-offer bargaining data from eBay, deriving bounds on buyers and sellers private value distributions using a range of assumptions on behavior. These assumptions range from very weak (assuming only that acceptance and rejection decisions are rational) to less weak (e.g., assuming that bargaining offers are weakly increasing in players' private values). We estimate the bounds and show what they imply for consumer negotiation behavior in theory and practice. For the median product, bargaining ends in impasses in 43% of negotiations even when the buyer values the good more than the seller.

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Suggested Citation

Larsen, Bradley and Freyberger, Joachim and Freyberger, Joachim, How Well Does Bargaining Work in Consumer Markets? A Robust Bounds Approach (August 2021). NBER Working Paper No. w29202, Available at SSRN: https://ssrn.com/abstract=3913851

Bradley Larsen (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://www.stanford.edu/~bjlarsen/research.html

National Bureau of Economic Research (NBER) ( email )

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eBay Research Labs ( email )

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Joachim Freyberger

University of Wisconsin - Madison ( email )

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Madison, WI 53706-1481
United States

University of Bonn ( email )

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Postfach 2220
Bonn, D-53012
Germany

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