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Payoff uncertainty, bargaining power, and the strategic sequencing of bilateral negotiations
Author(s) -
Krasteva Silvana,
Yildirim Huseyin
Publication year - 2012
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2012.00184.x
Subject(s) - negotiation , microeconomics , bargaining power , outsourcing , stochastic game , economics , preference , economic surplus , business , industrial organization , marketing , welfare , market economy , political science , law
This article investigates the sequencing choice of a buyer who negotiates with the sellers of two complementary objects with uncertain payoffs. The possibility of inefficient trade may generate strict sequencing preference. The buyer begins with the weaker seller if the sellers have diverse bargaining powers and with the stronger one if both sellers are strong bargainers. This sequencing is likely to increase the social surplus. Moreover, the buyer may find it optimal to raise her own acquisition cost by committing to a minimum purchase price or outsourcing. The first‐ and second‐mover advantages for the sellers are also identified.