Nonstrategic Delay in Bargaining: An Experimental Investigation

Abstract

The practice of bargaining is strongly affected by procedural features. Procedures matter because they affect each party's bargaining power and, consequently, the negotiation outcome. The extent and nature of delay between offers and counteroffers are an example of procedural specification in bargaining. Bargaining models consider delay only as a strategic screening device to build a reputation for toughness, the logic being that the party with the smaller cost of delay obtains all the gain from trade. In reality, however, delay between offers is common because of imperfect player control over the duration of the offers for reasons other than strategic, namely, transactional, timing, and interruptions. This delay, in essence, limits the number of rounds of offers and counteroffers in a fixed-period negotiation compared to when there is no delay and, in turn, is expected to affect negotiation outcome. The objective of the current research is to experimentally explore the implications of nonstrategic delay between offers and counteroffers in a finite-horizon alternating-offer bargaining game with incomplete information but without discounting. Specifically, this study examines the effect of nonstrategic time delay during negotiation on (1) the effect of risk preference on negotiator effectiveness, (2) deadline effect, (3) first-mover advantage, and (4) conflict between the negotiating partners. As hypothesized, the results show that delay dilutes the effect of negotiators’ risk preference, eliminates the deadline effect, negates the first-mover advantage, and enhances dyadic conflict.