Management Science Vol. 59 No. 9 2013
Organization and Bargaining: Sales Process Choice at Auto Dealerships
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.
- DOI
- 10.1287/mnsc.1120.1691
- Volume
- 59
- Issue
- 9
- Pages
- 2003-2018
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref