Work

Horizontal Product Differentiation in Auctions and Multilateral Negotiations

Year: 2014

Type: article

Abstract: We experimentally compare first-price auctions and multilateral negotiations after introducing horizontal product differentiation into a standard procurement setting. Both institutions yield identical surplus for the buyer, a difference from prior findings with homogeneous products that results from differentiation’s influence on sellers’ pricing behavior. The data are consistent with this finding being driven by concessions from low-cost sellers in response to differentiation reducing their likelihood of being the buyer’s surplus-maximizing trading partner. Further analysis shows that introducing product differentiation increases the intensity of price competition among sellers, which contrasts with the conventional wisdom that product differentiation softens competition.

Source: Economica

DOI: 10.1111/ecca.12090

Authors: Charles J. Thomas, Bart J. Wilson

Institution: Chapman University

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

Funders: Pfizer, Clemson University, International Foundation for Research in Experimental Economics

OpenAlex ID: W3121910095

FWCI: 2.048

Cites: 30

Cited by: 28

Related to: 20