DP14078 Bargaining at Retail Stores: Evidence from Vienna

Author(s): Sandro Shelegia, Joshua Sherman
Publication Date: October 2019
Date Revised: October 2020
Keyword(s): Audit Study, Bargaining, posted price, Trading Mechanism
JEL(s): C78, C93, D12, L81
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14078

In the West, where posted prices are the norm, it is uncommon to observe consumers receive discounts below the posted price. Nevertheless, we find that when stores are asked, a discount is granted approximately 40% of the time, with a median discount percentage of 10%. Discounts are more likely to be offered by small-scale firms, for higher-priced products, and for non-sale items. More generally, differences in price delegation behavior across firm types serve as an indicator that monitoring costs and employee skills are important drivers of bargaining behavior.