Rent shifting and the order of negotiations

Marx, Leslie M and Shaffer, Greg (2007) Rent shifting and the order of negotiations. International Journal of Industrial Organization, 25 (5). pp. 1109-1125. ISSN 0167-7187

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Abstract

When two sellers negotiate terms of trade with a common buyer, the order in which the negotiations occur can affect the buyer's payoff. This suggests that the buyer may have preferences over which seller to negotiate with first. We find that when the efficient outcome calls for the buyer to purchase from only one seller, the buyer weakly prefers to negotiate first with the inefficient seller, and when the efficient outcome calls for the buyer to purchase from both sellers, the buyer prefers to negotiate first with the seller that has less bargaining power, or offers a smaller stand-alone surplus, all else being equal. These conclusions hold whether or not penalty clauses are feasible. © 2007 Elsevier B.V. All rights reserved.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Responsible Business Regulation Group
Depositing User:	Nicola Secker
Date Deposited:	01 Apr 2011 07:59
Last Modified:	02 Feb 2023 11:30
URI:	https://ueaeprints.uea.ac.uk/id/eprint/27819
DOI:	10.1016/j.ijindorg.2007.03.001

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