Speaker: Dr Ben Greiner
Affiliation: University of New South Wales
Title: Bargaining, Asymmetric Information, and Communication – An Experiment
Date: Tuesday, 9 Apr 2013
Time: 12:00 pm
Location: Lab 04, Level 0, Owen Glenn Building

(note the unusual time and venue)

This paper explores the effect of communication on negotiation behavior in a stylized bargaining environment with asymmetric information. In particular, we study an Ultimatum Game in which the total amount to be bargained over (the pie) might be unknown to one party. We systematically vary whether both parties are informed about the pie size (baseline), or only the proposer, or only the responder. In addition, we vary whether there is no communication before the bargaining procedure, or whether the informed party can send a message about the pie size before decisions are made. In one communication condition, the message sender is free to choose the correct or the wrong message (cheap talk), while in the second communication condition the sender can only choose whether to reveal or not to reveal the true pie size (“true talk”). We find that contrary to the theoretical prediction cheap talk has a significant positive effect on efficiency, while true talk is less effective than expected.