Patience Is Power: Bargaining and Payoff Delay

Jeongbin Kim, Wooyoung Lim and Sebastian Schweighofer-Kodritsch

No 15, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We provide causal evidence that patience is a significant source of bargaining power. Generalizing the Rubinstein (1982) bargaining model to arbitrarily non-stationary discounting, we first show that dynamic consistency across bargaining rounds is sufficient for a unique equilibrium, which we characterize. We then experimentally implement a version of this game where bargaining delay is negligible (frequent offers, so dynamic consistency holds by design), while payoff delay is significant (a week or month per round of disagreement, with or without front-end delay). Our treatments induce different time preferences between subjects by randomly assigning individuals different public payoff delay profiles. The leading treatment allows to test for a general patience advantage, predicted independent of the shape of discounting, and it receives strong behavioral support. Additional treatments show that this advantage hinges on the availability of immediate payoffs and reject exponential discounting in favor of present-biased discounting.

Keywords: Alternating-Offers Bargaining; Time Preferences; Present Bias; Laboratory Experiments (search for similar items in EconPapers)
JEL-codes: C78 C91 D03 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2023-05-09
New Economics Papers: this item is included in nep-des, nep-exp, nep-gth and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0015

DOI: 10.48462/opus4-4946

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