Fairness and Transparency in One-to-Many Bargaining with Complementarity: An Experimental Study

Abstract

We report an experiment designed to study bargaining behavior between one buyer and multiple sellers with complementarity and how it is influenced by fairness concern and information transparency. We base our setup on a structured alternating-offer bargaining model in which a buyer procures complementary items from two heterogeneous sellers with endogenous choice of the order of bargaining. In addition, we implemented an information transparency manipulation regarding whether the sellers were informed about each other’s offers/counteroffers with the buyer. Experimental behavior exhibited deviations from equilibrium predictions that did not differ significantly by information condition, suggesting that sellers were not significantly influenced by direct social comparison between each other. Further analysis suggests that each seller demanded splitting the value of the deal approximately half-half with the buyer as a normative fairness benchmark. The buyers, on the other hand, did not have a demand for fairness that was based on a fairness benchmark.