Using Experiments to Compare the Predictive Power of Models of Multilateral Negotiations

Cary Deck and Charles Thomas

Working Papers from Chapman University, Economic Science Institute

Abstract: We conduct unstructured negotiations in a laboratory experiment designed to empirically assess the predictive power of three approaches to modeling 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, with the modeling approaches distinguished by whether the buyer negotiates with the sellers sequentially, simultaneously, or in a “take-it-or-leave-it” fashion. Our experiment features two scenarios within which the three approaches have observationally distinct predictions: a differentiated scenario with one highsurplus 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 affect the observed terms of trade. Our findings match the predictions from the sequential approach, supporting its use in modeling multilateral negotiations.

Keywords: Negotiations & Bargaining; Laboratory Experiments; Procurement; Mergers & Acquisitions; Personnel Economics; Investment (search for similar items in EconPapers)
JEL-codes: C7 C9 D4 L1 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-exp and nep-gth
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http://www.chapman.edu/research-and-institutions/e ... -comparison-2016.pdf

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Journal Article: Using experiments to compare the predictive power of models of multilateral negotiations (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:16-29

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