Organization and bargaining: Sales process choice at auto dealerships


Journal Article

This paper examines how firms' organizational form affects prices negotiated. Negotiated prices are one factor determining whether a vendor or customer captures the value from a transaction. Firms that systematically negotiate more effectively capture more value. Research has investigated individual- and market-level determinants of negotiation outcomes, but little has been done on the firm-level determinants of negotiated prices. I present a first look at one feature, sales process: whether salespeople handle the entire sale in parallel or customers begin with less experienced salespeople who can escalate difficult assignments. I model firms' choice of sales process as a biform game and test predictions of the model using a combination of transaction-level data on new car purchases in the United States and a unique survey of dealership management practices. I find that a serial process has implications consistent with improving firms' bargaining power and reducing customers' outside options. © 2013 INFORMS.

Full Text

Duke Authors

Cited Authors

  • Bennett, VM

Published Date

  • September 1, 2013

Published In

Volume / Issue

  • 59 / 9

Start / End Page

  • 2003 - 2018

Electronic International Standard Serial Number (EISSN)

  • 1526-5501

International Standard Serial Number (ISSN)

  • 0025-1909

Digital Object Identifier (DOI)

  • 10.1287/mnsc.1120.1691

Citation Source

  • Scopus