On the Role of Confidentiality and Deadlines in Bilateral Negotiations

41 Pages Posted: 4 Mar 2010 Last revised: 28 Oct 2010

See all articles by Silvana Krasteva

Silvana Krasteva

Texas A&M University

Huseyin Yildirim

Duke University - Department of Economics

Date Written: January 1, 2010

Abstract

The preference between public and private negotiations for a buyer who sequentially visits two suppliers is examined. It is shown that the buyer weakly prefers to conduct private negotiations in order to create strategic uncertainty about the trade history. With substitute goods, such uncertainty is valuable only when price offers have short expiries that prevent a head-to-head supplier competition. With complementary goods, strategic uncertainty is valuable to the extent that price coordination becomes a concern for suppliers, which is likely to be the case when suppliers possess relatively high bargaining powers; price offers have short expiries; and/or goods are weak complements. The effects of mandatory disclosure laws, extended return policies, and purchasing alliance formation on trade efficiency are also discussed.

Keywords: public negotiations, private negotiations, exploding offers, open-ended offers, bargaining power, coordination.

JEL Classification: C70, L23

Suggested Citation

Krasteva, Silvana Simeonova and Yildirim, Huseyin, On the Role of Confidentiality and Deadlines in Bilateral Negotiations (January 1, 2010). Available at SSRN: https://ssrn.com/abstract=1540806 or http://dx.doi.org/10.2139/ssrn.1540806

Silvana Simeonova Krasteva (Contact Author)

Texas A&M University ( email )

Langford Building A
798 Ross St.
College Station, TX 77843-3137
United States
(979) 845-7384 (Phone)

HOME PAGE: http://econweb.tamu.edu/skrasteva/

Huseyin Yildirim

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1805 (Phone)
919-684-8974 (Fax)

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