Decision Times Reveal Private Information in Strategic Settings: Evidence from Bargaining Experiments

Abstract

People naturally respond quickly when they have a clear preference and slowly when they are close to indifference. The question is whether others exploit this tendency to infer private information. In two-stage bargaining experiments, we observe that the speed with
which buyers reject sellers’ first-stage offers decreases with the size of the immediate foregone surplus. This should allow sellers to infer buyers’ values from observable response times
(RT), creating an incentive for buyers to manipulate their RT. We identify distinct conditions under which subjects do, and do not, exhibit such strategic behavior. These results provide the first insight into the possible use of RT as a strategic variable.

Keywords: Response Time, Bargaining, Behavioral, Game Theory

JEL Classification: C91, D01, D87