BARGAINING VERSUS POSTED-PRICE SELLING

Two popular selling methods - bargaining and posted-price selling - ar e compared here in a dynamic model. When bargaining costs no more than posted-price selling, we find that bargaining is always optimal. When bargaining costs more, however, bargaining is still preferred if and only if the common cost for both selling methods is large enough. We a lso find that an increase in the discount rate or the seller's bargain ing power favors bargaining. Finally, we find that if the distribution becomes more dispersed and the increase in a buyer's valuation is suf ficiently large, bargaining is more likely to be adopted.