Skip to main content Skip to secondary navigation

Quantifying Bargaining Power Under Incomplete Information: A Supply-Side Analysis of the Used-Car Industry

This study quantifies bargaining power in supply-side negotiations with incomplete information, where car dealers negotiate inventory prices with large sellers at wholesale used-car auctions. We measure an agent’s bargaining power in an incomplete-information setting as the fraction of the agent’s take-it-or-leave-it-offer payoff she receives. We propose a direct-mechanism method for estimating a seller’s private value, interpreting it as the gradient of a menu from which the seller chooses her secret reserve price. We find that, on average, dealerships (buyers) have a similar degree of bargaining power as sellers. For manufacturer sellers, or sales with substantial buyer competition, sellers’ bargaining power is much higher.

Bradley Larsen
Anthony Lee Zhang
Publication Date
November, 2021