IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v127y2016icp70-86.html
   My bibliography  Save this article

Deal or no deal? The effect of alcohol drinking on bargaining

Author

Listed:
  • Au, Pak Hung
  • Zhang, Jipeng

Abstract

Alcohol drinking during business negotiation is a very common practice, particularly in some East Asian countries. Does alcohol consumption affect negotiator's strategy and consequently the outcome of the negotiation? If so, what is the mechanism through which alcohol impacts negotiator's behavior? We investigate the effect of a moderate amount of alcohol on negotiation using controlled experiments. Subjects are randomly matched into pairs to play a bargaining game with adverse selection. In the game, each subject is given a private endowment. The total endowment is scaled up and shared equally between the pair provided that they agree to collaborate. It is found that a moderate amount of alcohol consumption increases subjects’ willingness to collaborate, thus improving their average payoff. We find that alcohol consumption increases neither subjects’ preference for risk nor altruism. A possible explanation for the increase in the likelihood of collaboration is that subjects under the influence of alcohol are more “cursed” in the sense of Eyster and Rabin (2005), which is supported by the estimation results of a structural model of quantal response equilibrium.

Suggested Citation

  • Au, Pak Hung & Zhang, Jipeng, 2016. "Deal or no deal? The effect of alcohol drinking on bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 127(C), pages 70-86.
  • Handle: RePEc:eee:jeborg:v:127:y:2016:i:c:p:70-86
    DOI: 10.1016/j.jebo.2016.04.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268116300518
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jebo.2016.04.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jeremy W. Bray, 2005. "Alcohol Use, Human Capital, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 279-312, April.
    2. Erik Eyster & Matthew Rabin, 2005. "Cursed Equilibrium," Econometrica, Econometric Society, vol. 73(5), pages 1623-1672, September.
    3. Nicolas Ziebarth & Markus Grabka, 2009. "In Vino Pecunia? The Association Between Beverage-Specific Drinking Behavior and Wages," Journal of Labor Research, Springer, vol. 30(3), pages 219-244, September.
    4. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    5. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    6. Bethany L. Peters & Edward Stringham, 2006. "No Booze? You May Lose: Why Drinkers Earn More Money Than Nondrinkers," Journal of Labor Research, Transaction Publishers, vol. 27(3), pages 411-421, June.
    7. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    8. Justus Haucap & Annika Herr, 2014. "A note on social drinking: In Vino Veritas," European Journal of Law and Economics, Springer, vol. 37(3), pages 381-392, June.
    9. Masayo Sato & Yasushi Ohkusa, 2003. "An Empirical Study of Alcoholic Consumption and Labor Productivity in Japan," ISER Discussion Paper 0581, Institute of Social and Economic Research, Osaka University.
    10. Erdal Tekin, 2004. "Employment, Wages, and Alcohol Consumption in Russia," Southern Economic Journal, John Wiley & Sons, vol. 71(2), pages 397-417, October.
    11. Holt, Charles A & Sherman, Roger, 1994. "The Loser's Curse," American Economic Review, American Economic Association, vol. 84(3), pages 642-652, June.
    12. Ziggy MacDonald & Michael A. Shields, 2004. "Does problem drinking affect employment? Evidence from England," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 139-155, February.
    13. Luca Corazzini & Antonio Filippin & Paolo Vanin, 2015. "Economic Behavior under the Influence of Alcohol: An Experiment on Time Preferences, Risk-Taking, and Altruism," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-25, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brañas-Garza, Pablo & Cabrales, Antonio & Mateu, Guillermo & Sánchez, Angel & Sutan, Angela, 2023. "Social interaction and negotiation outcomes: An experimental approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 102(C).
    2. Giuseppe Attanasi & James C. Cox & Vjollca Sadiraj, 2022. "Festival Games: Inebriated and Sober Altruists," GREDEG Working Papers 2022-39, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    3. Daniel Houser & Jianxin Wang, 2021. "Business Drinking: Evidence from A Lab-in-the-Field Experiment," Working Papers 1074, George Mason University, Interdisciplinary Center for Economic Science.
    4. Au, Pak Hung & Lim, Wooyoung & Zhang, Jipeng, 2022. "In vino veritas? Communication under the influence—An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 325-340.
    5. Deck, Cary & Pate, Jennifer, 2022. "High time to study the relationship between marijuana use and economic behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 1-14.
    6. Wang, Jianxin & Huang, Cailing & Xu, Lin & Zhang, Junhuan, 2023. "Drinking into friends: Alcohol drinking culture and CEO social connections," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 982-995.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Justus Haucap & Annika Herr, 2014. "A note on social drinking: In Vino Veritas," European Journal of Law and Economics, Springer, vol. 37(3), pages 381-392, June.
    2. Au, Pak Hung & Lim, Wooyoung & Zhang, Jipeng, 2022. "In vino veritas? Communication under the influence—An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 325-340.
    3. Gary Charness & Dan Levin, 2009. "The Origin of the Winner's Curse: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 207-236, February.
    4. Johannes Moser, 2017. "Hypothetical thinking and the winner's curse: An experimental investigation," Working Papers 176, Bavarian Graduate Program in Economics (BGPE).
    5. Moser, Johannes, 2017. "Hypothetical thinking and the winner's curse: An experimental investigation," University of Regensburg Working Papers in Business, Economics and Management Information Systems 36304, University of Regensburg, Department of Economics.
    6. Wang, Jianxin & Huang, Cailing & Xu, Lin & Zhang, Junhuan, 2023. "Drinking into friends: Alcohol drinking culture and CEO social connections," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 982-995.
    7. Cox, Caleb, 2014. "Cursed beliefs with common-value public goods," MPRA Paper 53074, University Library of Munich, Germany.
    8. Cox, Caleb A., 2015. "Cursed beliefs with common-value public goods," Journal of Public Economics, Elsevier, vol. 121(C), pages 52-65.
    9. Carrillo, Juan D. & Palfrey, Thomas R., 2011. "No trade," Games and Economic Behavior, Elsevier, vol. 71(1), pages 66-87, January.
    10. Llorente-Saguer, Aniol & Sheremeta, Roman M. & Szech, Nora, 2023. "Designing contests between heterogeneous contestants: An experimental study of tie-breaks and bid-caps in all-pay auctions," European Economic Review, Elsevier, vol. 154(C).
    11. Dariel, Aurelie & Riedl, Arno & Siegenthaler, Simon, 2021. "Referral hiring and wage formation in a market with adverse selection," Games and Economic Behavior, Elsevier, vol. 130(C), pages 109-130.
    12. Farjam, Mike & Kirchkamp, Oliver, 2018. "Bubbles in hybrid markets: How expectations about algorithmic trading affect human trading," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 248-269.
    13. Adams, Scott J. & Heywood, John S. & Ullman, Darin F. & Venkatesh, Shrathinth, 2022. "Social jobs and the returns to drinking," Economics & Human Biology, Elsevier, vol. 46(C).
    14. Juan D. Carrillo & Thomas R. Palfrey, 2009. "The Compromise Game: Two-Sided Adverse Selection in the Laboratory," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 151-181, February.
    15. Marco Casari & Jingjing Zhang & Christine Jackson, 2016. "Same process, different outcomes: group performance in an acquiring a company experiment," Experimental Economics, Springer;Economic Science Association, vol. 19(4), pages 764-791, December.
    16. Maryam Dilmaghani, 2022. "The link between smoking, drinking and wages: Health, workplace social capital or discrimination?," Industrial Relations Journal, Wiley Blackwell, vol. 53(2), pages 160-183, March.
    17. Marco Caliendo & Juliane Hennecke, 2022. "Drinking is different! Examining the role of locus of control for alcohol consumption," Empirical Economics, Springer, vol. 63(5), pages 2785-2815, November.
    18. Llorente-Saguer, Aniol & Sheremeta, Roman & Szech, Nora, 2016. "Designing Contests Between Heterogeneous Contestants: An Experimental Study of Tie-Breaks and Bid-Caps in All-Pay Auctions," MPRA Paper 71202, University Library of Munich, Germany.
    19. Nicolas Ziebarth & Markus Grabka, 2009. "In Vino Pecunia? The Association Between Beverage-Specific Drinking Behavior and Wages," Journal of Labor Research, Springer, vol. 30(3), pages 219-244, September.
    20. Ginger Zhe Jin & Michael Luca & Daniel Martin, 2021. "Is No News (Perceived As) Bad News? An Experimental Investigation of Information Disclosure," American Economic Journal: Microeconomics, American Economic Association, vol. 13(2), pages 141-173, May.

    More about this item

    Keywords

    Alcohol consumption; Bargaining; Cursed equilibrium; Adverse selection;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:127:y:2016:i:c:p:70-86. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.