Experimental Evidence on Semi-structured Bargaining with Private Information
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.
We thank Maxim Frolov and Shaden Shabayek for outstanding research assistance. We are grateful to Mariagiovanna Baccara, Francis Bloch, Yann Bramoulle, Olivier Compte, Nicolas Jacquemet, Luca Merlino, Arno Riedl, Jean-Christophe Vergnaud and numerous seminar and conference participants for helpful comments and discussions. Margherita Comola acknowledges the financial support of the ANR Dynamite and the EUR ANR-17-EURE-0001 grants. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.