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Cooling-Off in Negotiations - Does It Work?

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Author Info
Oechssler, Jörg
Roider, Andreas
Schmitz, Patrick W.

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Abstract

Negotiations frequently end in conflict after one party rejects a final offer. In a large-scale internet experiment, we investigate whether a 24-hour cooling-off period leads to fewer rejections in ultimatum bargaining. We conduct a standard cash treatment and a lottery treatment, where subjects receive lottery tickets for several large prizes - emulating a high-stakes environment. In the lottery treatment, unfair offers are less frequently rejected, and cooling-off significantly reduces the rejection rate further. In the cash treatment, rejections are more frequent and remain so after cooling-off. This treatment difference is particularly pronounced for subjects with lower cognitive abilities.

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Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0463.

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Date of creation: 12 May 2009
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Handle: RePEc:awi:wpaper:0463

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Related research
Keywords: negotiations; ultimatum game; emotions; cooling-off; cognitive abilities; behavioral biases; internet experiment;

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Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
C99 - Mathematical and Quantitative Methods - - Design of Experiments - - - Other
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
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  1. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December. [Downloadable!] (restricted)
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  8. Werner Guth & Carsten Schmidt & Matthias Sutter, 2003. "Fairness in the Mail and Opportunism in the Internet - A Newspaper Experiment on Ultimatum Bargaining," Artefactual Field Experiments 0044, The Field Experiments Website. [Downloadable!]
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  9. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December. [Downloadable!] (restricted)
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  11. Stahl, Dale O. & Haruvy, Ernan, 2008. "Subgame perfection in ultimatum bargaining trees," Games and Economic Behavior, Elsevier, vol. 63(1), pages 292-307, May. [Downloadable!] (restricted)
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  15. Gary Bornstein & Ilan Yaniv, 1998. "Individual and Group Behavior in the Ultimatum Game: Are Groups More “Rational†Players?," Experimental Economics, Springer, vol. 1(1), pages 101-108, June. [Downloadable!] (restricted)
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  19. Nicholas Barberis & Ming Huang, 2008. "Stocks as Lotteries: The Implications of Probability Weighting for Security Prices," American Economic Review, American Economic Association, vol. 98(5), pages 2066-2100, December. [Downloadable!]
  20. Mathias Drehmann & Jorg Oechssler & Andreas Roider, 2005. "Herding and Contrarian Behavior in Financial Markets: An Internet Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1403-1426, December. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Oechssler, Jörg & Roider, Andreas & Schmitz, Patrick W., 2008. "Cognitive Abilities and Behavioral Biases," IZA Discussion Papers 3481, Institute for the Study of Labor (IZA). [Downloadable!]
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