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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 received 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6807.

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Date of creation: Apr 2008
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Handle: RePEc:cpr:ceprdp:6807

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

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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
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.:
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  4. 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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  6. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: Response Times Study," Levine's Bibliography 321307000000001011, UCLA Department of Economics. [Downloadable!]
  7. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August. [Downloadable!] (restricted)
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  8. Gary E. Bolton & Axel Ockenfels, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March. [Downloadable!] (restricted)
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  1. Joerg Oechssler & Andreas Roider & Patrick W. Schmitz, 2008. "Cognitive Abilities and Behavioral Biases," Working Papers 0465, University of Heidelberg, Department of Economics, revised May 2008. [Downloadable!]
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