Costly argumentation in bargaining

We study costly argumentation in two canonical bargaining games, where the proposer needs to justify her offer by providing arguments, because the responder derives disutility from accepting an offer that lacks sufficient justification. Argument provision is costly. Since justifying a less generous offer always requires more arguments, there is a strategic trade-off for the proposer: either invest in argument provision to persuade the responder to accept a lower offer, or refrain from providing arguments in which case the responder expects a more generous offer. Assuming an increasing and convex cost of argumentation, we show that an equilibrium with positive levels of argumentation exists in both models if the cost of argument provision is sufficiently low. Our comparative static analyses further reveal that an increase in one’s aversion to lack of sound arguments can make her worse off in equilibrium, both in terms of agreed pie share and collected utility.