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An Empirical Analysis of Bargaining with Voluntary Transmission of Private Information

Listed author(s):
  • Paul Pecorino
  • Mark Van Boening

We conduct an experimental analysis of bargaining under asymmetric information, where the dispute resolution mechanism can be interpreted as either a civil trial or conventional arbitration. In our treatment, we allow for credible and costless transmission of private information. Consistent with the theory, we find that plaintiffs with strong cases tend to reveal their private information to the defendant. As a result, this group of plaintiffs experiences a significant drop in their dispute rate under the treatment. We also consider a cheap-talk treatment under which transmitted information is not credible. When cheap talk is allowed, transmitted messages are not entirely ignored, but there is no reduction in the dispute rate for plaintiffs with strong cases.

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File URL: http://dx.doi.org/10.1086/381287
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Article provided by University of Chicago Press in its journal The Journal of Legal Studies.

Volume (Year): 33 (2004)
Issue (Month): 1 (01)
Pages: 131-156

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Handle: RePEc:ucp:jlstud:v:33:y:2004:p:131-156
DOI: 10.1086/381287
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLS/

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  1. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
  2. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
  3. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
  4. Steven Shavell, 1989. "Sharing of Information Prior to Settlement or Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 183-195, Summer.
  5. Pecorino, Paul & Van Boening, Mark, 2001. "Bargaining and Information: An Empirical Analysis of A Multistage Arbitration Game," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 922-948, October.
  6. Richard Watt, 2002. "Defending Expected Utility Theory: Comment," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 227-229, Spring.
  7. Matthew Rabin & Richard H. Thaler, 2001. "Anomalies: Risk Aversion," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 219-232, Winter.
  8. 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.
  9. Robert Slonim & Alvin E. Roth, 1998. "Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic," Econometrica, Econometric Society, vol. 66(3), pages 569-596, May.
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