The Role of External Search in Bilateral Bargaining

Abstract

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What matters in a price negotiation: Evidence from the U.S. auto retailing industry

“…At first glance one can find such a comparative static in Chikte and Deshmukh (1987). This and subsequent models in this subsection focus on both parties' uncertainty about willingness to pay that arises from uncertain outside options (there is no incomplete information about search cost or bargaining disutility).…”

“…6 This problem has motivated the papers by Lee (1994) and Chatterjee and Lee (1998), who, in fact, use car buying as their motivating example. Both models have a similar setup as Chikte and Deshmukh (1987); however, they allow buyers to hold on to the outside offers they have received throughout the entire bargaining process. The models in Lee (1994) and Chatterjee and Lee (1998) differ in that the former paper assumes that outside offers to the buyer are known to both the buyer and the seller, whereas the latter assumes that such offers are private information of the buyer (i.e., that the buyer cannot credibly convey to the seller what the outside offer is).…”

Advance-selling as a competitive marketing tool

“…1 Reservation prices and wages are often captured by the exponential distribution. For example, see Perloff and Salop (1985), Hendricks, Porter, and Wilson (1994), Trajtenberg (1989), Chikte and Deshmukh (1987), Anderson, de Palma, and Hong (1992), Evans (1985), Xie and Sirbu (1995), Bolton (1989). Table 1 Monopoly profits for spot and advance selling (ck b 1)…”

Bilateral trading and incomplete information: Price convergence in a small market

“…In the present work, we show that the Coasian phenomenon can exist even when all negotiations are publicly observable. Finally, there are several other papers on searching for outside options, for example, Chikte and Deshmukh ( [12]), Muthoo ([26]), Lee ([24]), Chatterjee and Lee ([11]) (This has private information about outside options). We do not discuss these in detail because they are not directly comparable to our work.…”