Experimental Evidence on Semi-structured Bargaining with Private Information

Margherita Comola (margherita.comola@universite-paris-saclay.fr) and Marcel Fafchamps

No 29265, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We conduct a laboratory experiment to study a decentralized market where goods are differentiated and evaluations are private. We implement different semi-structured bargaining protocols based on deferred acceptance, and we compare their performance to the benchmark scenario of a sealed-bid auction. We show that bargaining dramatically improves efficiency, mainly to the benefit of players rather than the silent auctioneer. A protocol of unconstrained simultaneous bargaining performs best, doubling the proportion of deals relative to the benchmark. This is because participants seek to reveal information through a gradual bidding-up strategy that favors bargaining environments. Aggregate efficiency nonetheless suffers from the fact that buyers bargain harder than sellers, and that some players over-bargain to appropriate a larger share of the unknown surplus.

JEL-codes: C78 C91 D47 D82 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-exp, nep-gth and nep-isf
Note: IO PE
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