AN ANALYTICAL MODEL OF BUYER‐SELLER BEHAVIOR

A purchase acceptability function is first developed for both buyers and sellers which includes emotional and rational product factors such as price, age, style, and color. In this context, the buyer-seller negotiating process is described and analyzed. The result is the determination of a threshold price. Given the threshold price, the analysis proceeds to the discussion of an acceptance function with a third variable considered, product age. A three dimensional surface depicting the situation is discussed. This model can be extended to the n dimensional case. The analysis then proceeds to the development of a model approximating services to represent the acceptance functions of both buyers and sellers. This is handled by Taylor series expansion. The resulting planes represent buyer-seller negotiation positions. Buyers are often in a position of considering trade-offs between various product attributes. Therefore, an acceptability transformation is introduced and normalized using ordinal scaling to arrive at a scaled acceptability function which relates product attributes to trade-offs in price. It is noted that this analysis can be readily extended to include the interaction of acceptance functions for a number of products, the negotiation process in non-product situations, and the introduction of time as a variable, where dynamic changes are considered.