Organization and Bargaining: Sales Process Choice at Auto Dealerships

Victor Manuel Bennett ()
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Victor Manuel Bennett: Marshall School of Business, University of Southern California, Los Angeles, California 90089

Management Science, 2013, vol. 59, issue 9, 2003-2018

Abstract: This paper examines how firms' organizational form affects prices negotiated. Negotiated prices are one factor determining whether a vendor or customer captures the value from a transaction. Firms that systematically negotiate more effectively capture more value. Research has investigated individual- and market-level determinants of negotiation outcomes, but little has been done on the firm-level determinants of negotiated prices. I present a first look at one feature, sales process: whether salespeople handle the entire sale in parallel or customers begin with less experienced salespeople who can escalate difficult assignments. I model firms' choice of sales process as a biform game and test predictions of the model using a combination of transaction-level data on new car purchases in the United States and a unique survey of dealership management practices. I find that a serial process has implications consistent with improving firms' bargaining power and reducing customers' outside options. This paper was accepted by Bruno Cassiman, business strategy.

Keywords: organizational studies; organizational design; personnel; strategy; games-group decisions; bargaining; industrial organization; firm objectives; organization and behavior (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (27)

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