Reducing buyer search costs: implications for electronic marketplaces
Management Science - Special issue: Frontier research on information systems and economics
Dynamic Programming and Optimal Control
Dynamic Programming and Optimal Control
Markov Decision Processes: Discrete Stochastic Dynamic Programming
Markov Decision Processes: Discrete Stochastic Dynamic Programming
Managing Online Auctions: Current Business and Research Issues
Management Science
The Landscape of Electronic Market Design
Management Science
Measuring Risk Aversion in a Name-Your-Own-Price Channel
Decision Analysis
Managing information diffusion in Name-Your-Own-Price auctions
Decision Support Systems
Optimal Reverse-Pricing Mechanisms
Marketing Science
TECHNICAL NOTE---Revenue Management with Bargaining
Operations Research
Dynamic Pricing of Limited Inventories When Customers Negotiate
Operations Research
Competitive Behavior-Based Price Discrimination for Software Upgrades
Information Systems Research
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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.