17. Bargaining in Online Markets

The chapter 'Bargaining in Online Markets' delves into the complexities of bargaining and negotiations in economic life, using eBay's Best Offer platform as a prime example. It discusses the challenges and significance of studying real-world bargaining, emphasizing the role of communication and signaling in enhancing bargaining outcomes. The study reveals intriguing patterns such as 'reciprocal gradualism' and 'splitting the difference,' which pose puzzles for existing theoretical models. The chapter also explores the impact of cheap-talk signaling, where round numbers in pricing can signal eagerness to transact. Furthermore, it examines the effects of communication on bargaining efficiency and the potential for disintermediation. The research highlights the importance of understanding communication strategies in bargaining and provides insights into how platforms can design more efficient negotiation processes. The chapter concludes by emphasizing the need for further research and the potential of new datasets and tools in advancing the understanding of bargaining dynamics.