Initiating Bargaining

Review of Economic Studies, Forthcoming

42 Pages Posted: 25 Oct 2007 Last revised: 16 Aug 2015

See all articles by David Goldreich

David Goldreich

University of Toronto - Rotman School of Management

Lukasz Pomorski

AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2009

Abstract

We study whether the success of bargaining and the agreed upon terms depend on the characteristics of the person who initiates negotiations ("the initiator"). We approach this question in the context of high-stakes online poker tournaments, in which participants often negotiate a division of the prize money rather than risk playing until the end. Although initiators typically are in a worse than average position and are less well known, negotiations initiated by better known and better performing agents are more likely to lead to an agreement. This would suggest that gains to trade depend on who the initiator is, but, surprisingly, initiating bargaining does not affect the initiator's payoff in a completed deal.

Additionally, we find strong evidence in support of Cramton, Gibbons, and Klemperer (1987), who argue that for bargaining to succeed the parties' stakes in an enterprise must be close to equal.

Keywords: bargaining, negotiations, poker

JEL Classification: C78, C93, D7

Suggested Citation

Goldreich, David and Pomorski, Lukasz, Initiating Bargaining (February 23, 2009). Review of Economic Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1024292 or http://dx.doi.org/10.2139/ssrn.1024292

David Goldreich (Contact Author)

University of Toronto - Rotman School of Management ( email )

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Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-0833 (Phone)

Lukasz Pomorski

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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