Santa Clara University

Title: Price Matching Negotiation versus Simultaneous Negotiation in a Competitive Market

Abstract: Price matching negotiation has been seen in practice; however, no theoretical analysis has yet been dedicated to documenting this phenomenon. This article fills the literature gap by characterizing this special negotiation mechanism and comparing it with simultaneous negotiation as a benchmark negotiation. We find firms hold different preferences for these two negotiation mechanisms and their discrepancy is irreconcilable. But, with side payment, price matching negotiation may emerge as a mutually beneficial choice for all firms as compared to simultaneous negotiation with and without side payment. We also observe that bargaining power alters firms' preferences of price matching negotiation, and the firms' merger incentives vary in different channel structures.