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McAdams, David, and
Michael Schwarz. 2007. "Credible Sales Mechanisms and Intermediaries."
,
97(1): 260-276.
Show Article Details
DOI: 10.1257/aer.97.1.260
Abstract:We consider a seller who faces several buyers and lacks access to an institution to
credibly close a sale. If buyers anticipate that the seller may negotiate further, they
will prefer to wait before making their best and final offers. This in turn induces the
seller to bargain at length with buyers, even if doing so is costly. When the seller's
cost of soliciting another round of offers is either very large or very small, the seller
credibly commits to an auction and experiences negligible bargaining costs. Otherwise,
there may be several rounds of increasing offers and significant seller
losses. In these situations, an intermediary with a sufficiently valuable reputation
and/or weak marginal incentives regarding price can create value by credibly
committing to help sell the object without delay. (JEL C78, D44)
Additional links:
Link to Appendix
Authors:
McAdams, David
Schwarz, Michael
JEL Classifications:
:
None
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