Biased judgements of fairness in bargaining: A replication in the laboratory

Abstract

In an influential paper, Babcock, Loewenstein, Issacharoff, and Camerer (1995) uncover evidence that knowledge about one's role in a settlement bargaining situation increases the frequency of bargaining impasse. The authors argue that role knowledge triggers self-serving interpretations of the case-related information that is the foundation of settlement bargaining. Self-servingly biased perception subsequently impedes successful settlement bargaining. We replicate the experiment in the computer laboratory. Our results are largely in line with the original findings. When participants know their bargaining role before studying the case materials rather than afterwards, settlement frequency decreases. This treatment effect is substantially smaller than in the original study. Given the new data, a Bayesian replication analysis reallocates the large share of credibility to a null model. We argue that this result is driven by the much smaller effect size that we observe in the highly controlled environment of the laboratory. Moreover, we extend the original analysis by estimating causal mediation effects of self-serving bias measures on the observed relationship between role-knowledge and settlement outcomes and find that self-servingly weighing legal arguments completely mediates the negative effect of role-knowledge on settlement frequency. In conclusion, we evaluate our replication as successful.