Online Dispute Resolution Through the Lens of Bargaining and Negotiation Theory: Toward an Integrated Model

[Excerpt] In this article we apply negotiation and bargaining theory to the analysis of online dispute resolution. Our principal objective is to develop testable hypotheses based on negotiation theory that can be used in ODR research. We have not conducted the research necessary to test the hypotheses we develop; however, in a later section of the article we suggest a possible methodology for doing so. There is a vast literature on negotiation and bargaining theory. For the purposes of this article, we realized at the outset that we could only use a small part of that literature in developing a model that might be suitable for empirical testing. We decided to use the behavioral theory of negotiation developed by Richard Walton and Robert McKersie, which was initially formulated in the 1960s. This theory has stood the test of time. Initially developed to explain union-management negotiations, it has proven useful in analyzing a wide variety of disputes and conflict situations. In constructing their theory, Walton and McKersie built on the contributions and work of many previous bargaining theorists including economists, sociologists, game theorists, and industrial relations scholars. In this article, we have incorporated a consideration of the foundations on which their theory was based. In the concluding section of the article we discuss briefly how other negotiation and bargaining theories might be applied to the analysis of ODR

How do coalitions get built - Evidence from an extensive form coalition game with renegotiation & externalities

We investigate a three-person coalition game in which one bargainer, the builder, can propose and build a coalition over two stages. In equilibrium, coalition building ends with an efficient grand coalition, while the equilibrium path is contingent on the values of the two-person coalitions and associated externality payoffs. Considering relative payoffs need not change the equilibrium path. Nevertheless, outcomes in the experiment are often inefficient. One explanation is that bargainers have difficulties anticipating the future actions of other bargainers. This problem might be mitigated by allowing bargainers to communicate prior to each stage. A test finds that communication does in fact increase efficiency, although unevenly, and at the cost of the builder. The study implies that the nature and pattern of communication among bargainers is a critical factor in efficient coalition building.coalitional bargaining, communication, game theory, experiment

Bargaining under Incomplete Information, Fairness, and the Hold-Up Problem

In the hold-up problem incomplete contracts cause the proceeds of relation specific investments to be allocated by ex-post bargaining. The present paper investigates the efficiency of incomplete contracts if individuals have heterogeneous preferences implying heterogeneous bargaining behavior and - equally important - preferences are private information. As the sunk investment costs can thus potentially signal preferences, they can influence beliefs and consequently bargaining outcomes. The necessities of signalling are shown to generate very strong investment incentives. These incentives are based on the desire not to reveal information that is unfavorable in the ensuing bargaining. After finding all perfect Bayesian equilibria in pure strategies, the paper derives the necessary and sufficient conditions under which it is optimal to invest and trade efficiently

Information, fairness, and efficiency in bargaining

Economic theory assumes people strive for efficient agreements that benefit all consenting parties. The frequency of mutually destructive conflicts such as strikes, litigation, and military conflict, therefore, poses an important challenge to the field

Never retreat, never surrender: The bargaining power of commitment in the Hawk-Dove game

This paper studies experimentally the conditions that improve bargaining power using threats in a negotiation process. Following Schelling’s (1960) ideas we choose the hawk-dove game because is the simplest negotiation environment with inequity distribution in equilibrium. The analysis is focused on three essential elements of commitment: the possibility of a player to announce his own actions, the credibility of these messages and the experience acquired in the negotiation process. The empirical evidence shows that, in the first period, subjects do not realize the bargaining power of commitment. When the game is repeated and experience increases, subjects gradually understand the advantages of a threat, turning the payoffs into their favor. Credibility is also relevant for the relation, if subjects can choose their message, it is common to find strategic liars, and their rivals punish this behavior.Credible threats, negotiation, experiments

Contracts, Behavior, and the Land-Assembly Problem:An Experimental Study

We use multilateral bargaining experiments to examine how the order of bargaining (simultaneous or sequential) and the nature of contracts (contingent or non-contingent) affect the duration of bargaining, the efficiency of exchange, and the distribution of the surplus in a laboratory land-assembly game with one buyer and two sellers. While theory predicts an earnings advantage for the first seller when contracts are sequential and contingent, and for the second seller when contracts are sequential and non-contingent, we find that when a seller has an earnings advantage in the laboratory, it is the first seller to bargain in the non-contingent contract treatments. This result contradicts conventional wisdom and a common result from the land-assembly literature that it is advantageous to be the last seller to bargain, a so-called “holdout”. We also find evidence that sequential bargaining leads to more aggressive seller bargaining and greater bargaining delay than simultaneous bargaining, ceteris paribus, and that non-contingent contracts increase bargaining delay and the likelihood of failed agreements. The majority of sellers indicated a preference for being the first seller to bargain in all sequential bargaining treatments.