Communication and Bargaining Breakdown: An Empirical Analysis

Matthew Backus, Thomas Blake, Jett Pettus and Steven Tadelis

No 27984, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Bargaining breakdown—whether as delay, conflict, or missing trade—plagues bargaining in environments with incomplete information. Can a bargaining environment that facilitates or restricts communication alleviate these costs? We exploit a unique opportunity to study this question using real market transactions: eBay Germany’s Best Offer platform. On May 23, 2016, the platform introduced unstructured communication allowing buyers and sellers on the desktop version of the site, but not the mobile app, to accompany price offers with a message. Using this natural experiment, our difference-in-differences approach documents a 14% decrease in the the rate of breakdown among compliers. Though adoption is immediate, the effect is not. We show, using text analysis, that the dynamics are consistent with repeat players learning how to use communication in bargaining, and that the messaging strategies of experienced sellers are correlated with successful bargaining.

JEL-codes: C78 D82 D83 M21 (search for similar items in EconPapers)
Date: 2020-10
Note: IO LS POL
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Citations: View citations in EconPapers (5)

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