The Hidden Cost of Bargaining: Evidence from a Cheating‐Prone Marketplace

28 Pages Posted: 30 Sep 2020

Date Written: August 2020

Abstract

It is widely believed that successful bargaining helps consumers increase their surplus. We present evidence from a field experiment showing that bargaining over price reduces buyer surplus in a marketplace where sellers cheat on the weight whose value may more than offset the price discount. Our results show that bargaining entails hidden costs since sellers cheat significantly more when buyers bargain than not and they cheat significantly more when bargaining succeeds than fails. Overall bargaining reduces buyer surplus than not bargaining. Our result is relevant for credence goods markets where bargaining over prices may induce sellers to “undertreat” more.

Suggested Citation

Bhattacharya, Haimanti and Dugar, Subhasish, The Hidden Cost of Bargaining: Evidence from a Cheating‐Prone Marketplace (August 2020). International Economic Review, Vol. 61, Issue 3, pp. 1253-1280, 2020, Available at SSRN: https://ssrn.com/abstract=3700027 or http://dx.doi.org/10.1111/iere.12456

Haimanti Bhattacharya (Contact Author)

University of Utah ( email )

Department of Economics
1645 E Campus Center Drive, #308
Salt Lake City, UT 84112
United States

HOME PAGE: http://www.econ.utah.edu/~bhattacharya

Subhasish Dugar

University of Calgary ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

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