On the role of confidentiality and deadlines in bilateral negotiations

The preference between public and private negotiations for a buyer who sequentially visits two sellers is examined. It is shown that the buyer (weakly) prefers private negotiations so as to create strategic uncertainty about the trade history. With substitute goods, such uncertainty is valuable only when price offers have short deadlines that prevent a head-to-head competition. With complementary goods, strategic uncertainty is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price offers have short deadlines; and/or goods are weak complements. Sellers' strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated. © 2012 Elsevier Inc.

Duke Scholars

Author Huseyin Yildirim Economics