When the Price You See Is Not the Price You Get: A Bargaining Study

Although (or because) it is uncommon to observe consumers bargaining at retail stores in the Western world, the circumstances under which retail rms are actually willing to bargain is largely unknown. We construct a theoretical model in order to better understand how price and rm characteristics in uence a rm's incentives to bargain and test the model's predictions by conducting a eld experiment at nearly 300 stores throughout Vienna, Austria. In particular, we analyze the extent to which retail rms throughout Vienna consent to granting a discount when asked. A discount was granted approximately 40% of the time, and the average positive discount was approximately 10% o of a product's posted price. We relate rms' willingness to bargain to price and rm characteristics, in line with our theory.