Working Paper: CEPR ID: DP14078
Authors: Sandro Shelegia; Joshua Sherman
Abstract: 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.
Keywords: bargaining; posted price; trading mechanism; audit study
JEL Codes: L81; D12; C78; C93
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Discount Request (L42) | Discount Granted (H43) |
| Higher-Priced Products (D49) | Discount Granting Behavior (D15) |
| Employee Monitoring Intensity (C91) | Discount Granting Behavior (D15) |
| Employee Skill (J24) | Discount Granting Behavior (D15) |
| Discount Granting Behavior (D15) | Discount Size (H43) |
| Firm Size (L25) | Employee Authority Delegation (M54) |
| Jewelry Stores (L61) | Discount Granting Behavior (D15) |
| Firm Size (L25) | Discount Granting Behavior (D15) |