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Experimental Evidence on Semi-structured Bargaining with Private Information

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Listed:
  • Margherita Comola
  • Marcel Fafchamps

Abstract

We conduct a laboratory experiment to study a decentralized market where goods are differentiated and evaluations are private. We implement different semi-structured bargaining protocols based on deferred acceptance, and we compare their performance to the benchmark scenario of a sealed-bid auction. We show that bargaining dramatically improves efficiency, mainly to the benefit of players rather than the silent auctioneer. A protocol of unconstrained simultaneous bargaining performs best, doubling the proportion of deals relative to the benchmark. This is because participants seek to reveal information through a gradual bidding-up strategy that favors bargaining environments. Aggregate efficiency nonetheless suffers from the fact that buyers bargain harder than sellers, and that some players over-bargain to appropriate a larger share of the unknown surplus.

Suggested Citation

  • Margherita Comola & Marcel Fafchamps, 2021. "Experimental Evidence on Semi-structured Bargaining with Private Information," NBER Working Papers 29265, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29265
    Note: IO PE
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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