Searching for a Bargain: Power of Strategic Commitment

Selcuk Ozyurt

American Economic Journal: Microeconomics, 2015, vol. 7, issue 1, 320-53

Abstract: This paper shows that in a multilateral bargaining setting where the sellers compete á la Bertrand, a range of prices that includes the monopoly price and 0 are compatible with equilibrium, even in the limit where the reputational concerns and frictions vanish. In particular, the incentive of committing to a specific demand, the opportunity of building reputation about inflexibility, and the anxiety of preserving their reputation can tilt players' bargaining power in such a way that being deemed as a tough bargainer is bad for the competing players, and thus, price undercutting is not optimal for the sellers. (JEL C78, D43, D83)

JEL-codes: C78 D43 D83 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mic.20130027
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