Communication in Multilateral Bargaining

28 Pages Posted: 3 Nov 2013 Last revised: 15 Jan 2015

See all articles by Marina Agranov

Marina Agranov

California Institute of Technology

Chloe Tergiman

The Pennsylvania State University

Date Written: September 1, 2013

Abstract

One of the most robust phenomena in the experimental literature on multilateral bargaining is the failure of proposers to extract equilibrium rents. However, all previous experiments have overlooked the fact that outside the lab committee members are allowed to - and do - engage in sometimes intense communication processes prior to voting on a proposal. We conduct an experimental test of the Baron-Ferejohn model in which we allow committee members to engage in unrestricted cheap-talk communication before a proposal is submitted. We find that proposers extract a significantly higher share of resources when communication is allowed. Communication increases proposer power through two channels. First, it mitigates the uncertainty surrounding the amount a coalition member is willing to accept. Second, it allows potential coalition members to compete for a place in the coalition by lowering this stated price.

Keywords: cheap-talk, baron-ferejohn, bargining, communication, experiment

JEL Classification: C7, C9, D7

Suggested Citation

Agranov, Marina and Tergiman, Chloe, Communication in Multilateral Bargaining (September 1, 2013). Journal of Public Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2349194 or http://dx.doi.org/10.2139/ssrn.2349194

Marina Agranov

California Institute of Technology ( email )

Pasadena, CA 91125
United States

HOME PAGE: http://www.hss.caltech.edu/~magranov/

Chloe Tergiman (Contact Author)

The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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