Communication in multilateral bargaining

Marina Agranov, Chloe Tergiman

Research output: Contribution to journalArticle

22 Scopus citations

Abstract

One of the most robust phenomena in the experimental literature on multilateral bargaining is the failure of proposers to extract equilibrium rents. However, all previous experiments have overlooked the fact that outside the lab committee members are allowed to - and do - engage in sometimes intense communication processes prior to voting on a proposal. We conduct an experimental test of the Baron-Ferejohn model in which we allow committee members to engage in unrestricted cheap-talk communication before a proposal is submitted. We find that proposers extract a significantly higher share of resources when communication is allowed. Communication increases proposer power through two channels. First, it mitigates the uncertainty surrounding the amount a coalition member is willing to accept. Second, it allows potential coalition members to compete for a place in the coalition by lowering this stated price.

Original languageEnglish (US)
Pages (from-to)75-85
Number of pages11
JournalJournal of Public Economics
Volume118
DOIs
StatePublished - Oct 2014

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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