In most markets, buyers differ in their ability or willingness to switch supplier. This note proposes a novel industry concentration measure that takes this heterogeneity into account. The index increases the share of captive sales, coincides with Hirschman–Herfindahl Index when none are captive, and ”pure monopoly” value 1 all captive.

A price-setting seller faces a buyer with unknown reservation value. We show that if the buyer is sufficiently risk averse, the seller can benefit from employing a Possibly-Final Offer (PFO) strategy. In a PFO, if the buyer rejects the seller’s initial offer the seller sometimes terminates the interaction. If the seller does not terminate, he follows up with a subsequent, more attractive offer....

Seller reputation is recognized as an essential determinant in online C2C marketplaces, but its influence on price premium remains unknown. The majority of existing studies indicate that seller reputation is positively correlated with sales price (price premium) on eBay US, but not on Taobao China. Conversely, the strong correlation between seller reputation and sales volume found on Taobao (vo...

This paper reports on a large scale field experiment testing strategies available to a seller participating in simultaneous competitive sequential, ascending price automobile auctions. Every other week, the seller offered approximately 120 vehicles for sale in an auction environment in which several competitive sellers offered on the order of 3,000 vehicles. The experiment tested various sequen...

This article reviews experimental work on two party bargaining where a bargainer has information unavailable to the other party. The situation is one where the bargaining is on a single issue only and is distributive, (i.e., the negotiations are on the sharing or distribution of the common gains from trade). Two experimental situations are reviewed and several observations are drawn, including ...

We develop a model of separating equilibrium where a monopolist markets a physical product to two types of consumers in the online channel. We show how the seller may use personalization technology to limit or even eliminate the distortion caused by the cannibalization problem. This results in higher product quality levels and earlier product introductions for goods aimed at low type consumers....

T paper studies the role of product availability in attracting consumer demand. We start with a newsvendor model, but additionally assume that stockouts are costly to consumers. The seller sets an observable price and an unobservable stocking quantity. Consumers anticipate the likelihood of stockouts and determine whether to visit the seller. We characterize the rational expectations equilibriu...

Long-term Contracts. We now briefly show that the use of a long-term contract cannot improve the outcome. Suppose that Alice and Bob retain individual asset ownership at date 0, but commit to a contract that specifies the price at which they transact at date 4. If the contract is only structured as an option without commitment, then it has no effect at all. However, if the contract is binding, ...

We consider a seller who can sell her product over two periods, advance and spot. The seller has private information about the product quality, which is unknown to customers in advance and publicly revealed in spot. The question we consider is whether the seller has an incentive to signal quality in advance and, if so, how she can convey a credible signal of product quality. We characterize the...

A trusted third party (TTP) is introduced to the buyer-seller protocol to guarantee the transaction fairness in protocol. However, the TTP practically increases the cost in the buyer-seller protocol. To address this issue, we propose a novel buyer–seller watermarking protocol to eliminate the need for a TTP. By dividing the buyer’s secret key into two primary mechanisms: the buyer’s watermark, ...