BARGAINING
Bargaining or haggling is a type of
negotiation in which the buyer and seller of a good or service dispute the
price which will be paid and the exact nature of the transaction that will take
place, and eventually come to an agreement.
Bargaining is an alternative pricing
strategy to fixed prices. Optimally, if it costs the retailer nothing to engage
and allow bargaining, he can divine the buyer’s willingness to spend. It allows
for capturing more consumer surplus as it allows price discrimination, a
process whereby a seller can charge a higher price to one buyer who is more
eager (by being richer or more desperate). Haggling has largely disappeared in
parts of the world where the cost to haggle exceeds the gain to retailers for
most common retail items. However, for expensive goods sold to uninformed
buyers such as automobiles, bargaining can remain commonplace.