An Empirical Analysis of Bargaining with Voluntary Transmission of Private Information
University of Alabama Department of Economics Working Paper No. 01-01-03
34 Pages Posted: 31 Jan 2001
Date Written: January 2001
We conduct an experimental analysis of bargaining under asymmetric information, where the dispute resolution mechanism can be interpreted either as 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.
JEL Classification: K4, D8, C7
Suggested Citation: Suggested Citation