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Bargaining at Retail Stores: Evidence from Vienna

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Abstract

The optimality of trading mechanisms has long been a subject of interest in economics, yet there exists little empirical evidence regarding which mechanisms of trade are deployed in practice. Our audit study of retail stores in Vienna documents previously unknown and important facts. Stores agree to a discount off of the posted price approximately 40% of the time. Discounts are more likely to be granted by small-scale firms, for higher-priced products, and for non-sale items. Our findings are consistent with the predictions of a principle-agent model in which a firm decides whether to augment posted prices with bargaining concessions.

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  • Sandro Shelegia & Joshua Sherman, 2018. "Bargaining at Retail Stores: Evidence from Vienna," Economics Working Papers 1606, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1606
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    More about this item

    Keywords

    Bargaining; posted price; trading mechanism; audit study.;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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