Do Buyer-Size Discounts Depend on the Curvature of the Surplus Function? Experimental Tests of Bargaining Models

Bradley Ruffle and Christopher Snyder Hans Normann ()
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Bradley Ruffle and Christopher Snyder Hans Normann: Department of Economics, Royal Holloway, University of London, http://www.rhul.ac.uk/Economics/about-us/normann.html
Authors registered in the RePEc Author Service: Hans-Theo Normann () and Bradley Ruffle ()

No 04/01, Royal Holloway, University of London: Discussion Papers in Economics from Department of Economics, Royal Holloway University of London

Abstract: A number of recent theoretical papers have shown that for buyer-size discounts to emerge in a bargaining model, the total surplus function over which parties bargain must have certain nonlinearities. We test the theory in an experimental setting in which a seller bargains with a number of buyers of different sizes. We generate nonlinearities in the surplus function by varying the shape of the seller’s cost function. Our results strongly support the theory. As predicted, large-buyer discounts emerge only in the case of increasing marginal cost, corresponding to a concave surplus function.

Keywords: Bargaining; Large-Buyer Discounts; Experiments (search for similar items in EconPapers)
JEL-codes: C78 C90 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
Date: Written
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Working Paper: Do Buyer-Size Discounts Depend on the Curvature of the Surplus Function? Experimental Tests of Bargaining Models (2003)
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