An empirical study of sequential offer bargaining during the Festival of Sacrifice

Abstract

We report results from a unique data set of real-life bargaining transactions collected from the market for livestock (sheep) before the Festival of Sacrifice (Eid al-Adha) in Izmir, Turkey. This market is characterized by frequent and aggressive bargaining, which occurs in the form of sequential price offers. We record bargaining transactions as they occur, and collect detailed information on the bargaining environment, as well as on the characteristics of buyers and sellers. We also elicit each seller’s outside option by means of an incentive compatible mechanism and obtain a reported maximum willingness to pay from buyers. We particularly focus on aspects of the bargaining process, such as non-price communication. In different types of empirical analysis, results robustly indicate that the presence and content of communication matters, for the likelihood of a sale as well as concessions made. Specifically, buyer-side communication is associated with larger concessions from the seller and a higher probability of sale. The presence of a mediator during the negotiation is associated with a higher probability of sale as well, while it has no effect on prices. We also provide results on the relative importance of groups of variables for predicting bargaining outcomes, which can provide directions for further research in bargaining.