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When Ignorance Is Bliss: Information Exchange and Inefficiency in Bargaining

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Author Info

  • George Loewenstein
  • Don A. Moore

Abstract

Most theories of legal discovery assume that the sharing of information among disputing parties will lead to convergence of expectations and facilitate settlement. However, psychological research shows that shared information, if open to multiple interpretations, is likely to be interpreted egocentrically by the disputants, which can cause beliefs to diverge rather than converge. We present results from a bargaining experiment that demonstrate that information sharing leads to divergence of expectations and to settlement delays when the information exchanged is amenable to multiple interpretations. By contrast, when there is only one obvious interpretation, information sharing leads to convergence of expectations and speeds settlement. We show, further, that information sharing moderates the relationship between the size of the bargaining zone and the prospects for settlement.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/382581
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Bibliographic Info

Article provided by University of Chicago Press in its journal The Journal of Legal Studies.

Volume (Year): 33 (2004)
Issue (Month): 1 (01)
Pages: 37-58

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Handle: RePEc:ucp:jlstud:v:33:y:2004:p:37-58

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Web page: http://www.journals.uchicago.edu/JLS/

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Cited by:
  1. Karagozoglu Emin & Riedl Arno, 2010. "Information, Uncertainty, and Subjective Entitlements in Bargaining," Research Memorandum 042, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. De Cremer, David & Dijk, Eric van, 2009. "Paying for sanctions in social dilemmas: The effects of endowment asymmetry and accountability," Organizational Behavior and Human Decision Processes, Elsevier, vol. 109(1), pages 45-55, May.
  3. Christine Jolls, 2007. "Behavioral Law and Economics," NBER Working Papers 12879, National Bureau of Economic Research, Inc.
  4. James Cooper & William Kovacic, 2012. "Behavioral economics: implications for regulatory behavior," Journal of Regulatory Economics, Springer, vol. 41(1), pages 41-58, February.
  5. Qiyan ONG & Yohanes Eko RIYANTO & Walter E. THESEIRA & Steven M. SHEFFRIN, 2013. "The Self-Image Signaling Roles of Voice in Decision-Making," Economic Growth centre Working Paper Series 1303, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  6. Christoph Engel & Michael Kurschilgen, 2011. "The Coevolution of Behavior and Normative Expectations. Customary Law in the Lab," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2011_32, Max Planck Institute for Research on Collective Goods.
  7. Christoph Engel & Heike Hennig-Schmidt & Bernd Irlenbusch & Sebastian Kube, 2009. "On Probation. An Experimental Analysis," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2009_38, Max Planck Institute for Research on Collective Goods.

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