When to Haggle

Miller, Nolan H.; Piankov, Nikita; Zeckhauser, Richard J.

doi:10.2139/ssrn.284017

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When to Haggle

47 Pages Posted: 3 Oct 2001

See all articles by Nolan H. Miller

Nolan H. Miller

University of Illinois at Urbana-Champaign

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: May 2001

Abstract

A seller faces a buyer with unknown reservation value. We show that buyer risk aversion can make it in the seller's interest to haggle. That is, the seller should make an initial offer and then, if it is rejected, make a second offer with some probability strictly less than one. This is true regardless of whether the seller haggles over price, quality, or price and quality simultaneously. The results are extended to contexts with multiple types of buyers and multiple dimensions for haggling.

Keywords: Economics, Microeconomics, Economics, Economic and Econometric Theory

Suggested Citation: Suggested Citation

Miller, Nolan and Piankov, Nikita Evgenjevich and Zeckhauser, Richard J., When to Haggle (May 2001). Available at SSRN: https://ssrn.com/abstract=284017 or http://dx.doi.org/10.2139/ssrn.284017