A laboratory study of haggling with deadlines

This paper explores the efficiency properties of market institutions featuring haggling under a fixed time horizon. The coincidence of last second agreements with costly disagreements suggests that the two are connected, reducing efficiency. Buyer search reduces the incidence of delay but fails to reduce efficiency loss. Instead, the reduced transaction volume found in an earlier study is better explained by market power, private information, and strategic repeated interaction. In addition, even with costless search, substantial losses due to inefficient matching and failure to reach agreement persist, suggesting that efficiency losses are tied to the nature of search in haggling.