Confrontation Costs in Negotiations: Barganing Under the Veil of a Screen

Abstract

In negotiations the objectives of parties are generally in conflict. Confronting this conflict can trigger negative emotions, such as nervousness, embarrassment or awkwardness, which I denote as confrontation costs. I run a lab experiment to explore whether these costs shape the decision to engage in negotiations, and how this depends on the communication channel. I find that when participants can opt-out from in person negotiations, nearly 40% of times they give up monetary payoffs to avoid bargaining. However, when negotiations are electronic instead of face-to-face, the probability of avoiding them roughly halves due to smaller confrontation costs, allowing agreements that otherwise would not occur. When I analyze differences by gender, I find that women are more reluctant to bargain than men, and that they suffer higher confrontation costs, which could be mitigated electronically.

Keywords: Bargaining, Conflict Aversion, Social Pressure, Image Concerns, Gender

JEL Classification: C78, C91, D91, J16