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  home > latest issue > Abstract: Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions

Abstract

Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions

The Review of Network Economics

Vol. 6, Issue 2 - June 2007, pp 134-160



Authors
  Michael A. Arnold
Department of Economics, University of Delaware

Thierry Pénard
CREM, University of Rennes 1
E-mail: [email protected]

Abstract
  This paper develops a model of oligopolistic price competition to analyze the impact of online intermediaries such as Autobytel.com on the price setting process in the automobile market. The roles of dealer search costs, the fraction of buyers using the intermediary, the value of the item being sold, and heterogeneity in buyer bargaining abilities are explored. The model provides theoretical insights relevant to the empirical literature addressing the role that intermediaries like Autobytel play in online markets. For example, we present conditions under which the price offered through the intermediary is either higher or lower than offline (bargained) prices.

Keywords: Internet, bargaining, referral intermediary.

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