Optimal Selling Strategies: When to Haggle, When to Hold Firm

Abstract

A seller encountering risk-neutral buyers one at a time should, if commitments are feasible, quote a single take-it-or-leave-it price to each. This strategy is superior to any other for finite or infinite buyer populations, whether there is learning or the distribution of buyer prices is known at the outset, with one object for sale or many. Although haggling may offer advantages in terms of price discrimination, these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices.