Using experiments to compare the predictive power of models of multilateral negotiations

Cary Deck () and Charles Thomas

International Journal of Industrial Organization, 2020, vol. 70, issue C

Abstract: We conduct unstructured negotiations in a laboratory experiment designed to empirically assess the predictive power of models of the multilateral negotiations observed in diverse strategic settings. For concreteness we consider two sellers negotiating with a buyer who wants to make only one trade, and we categorize the models by whether introducing a second seller to bilateral negotiations always, never, or sometimes increases the buyer's payoff. Our experiment features two scenarios within which the three categories of models have observationally distinct predictions: a differentiated scenario with one high-surplus seller and one low-surplus seller, and a homogeneous scenario with identical high-surplus sellers. In both scenarios the buyer tends to trade with a high-surplus seller at terms indistinguishable from those in bilateral negotiations with a high-surplus seller, meaning that introducing a competing seller does not substantially affect the observed terms of trade. Our findings match the predictions from models in the never-matters category, supporting their use when modeling multilateral negotiations.

Keywords: Negotiations & Bargaining; Laboratory Experiments; Procurement; Mergers & Acquisitions; Investment (search for similar items in EconPapers)
JEL-codes: C7 C9 D4 L1 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Using Experiments to Compare the Predictive Power of Models of Multilateral Negotiations (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:70:y:2020:i:c:s0167718720300345

DOI: 10.1016/j.ijindorg.2020.102612

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