THE INFORMATION DILEMMA IN NEGOTIATIONS: EFFECTS OF EXPERIENCE, INCENTIVES, AND INTEGRATIVE POTENTIAL

Abstract

This paper investigates the information dilemma in negotiations: if negotiators reveal information about their priorities and preferences, more efficient agreements may be reached but the shared information may be used strategically by the other negotiator, to the revealers' disadvantage. We present a theoretical model that focuses on the characteristics of the negotiators, the structure of the negotiation, and the available incentives; it predicts that experienced negotiators will out‐perform naive negotiators on distributive (competitive) tasks, especially when they have information about their counterpart's preferences and the incentives are high—unless the task is primarily integrative, in which case information will contribute to the negotiators maximizing joint gain. Two experiments (one small, one large) showed that the revelation of one's preferences was costly and that experienced negotialors outperformed their naive counterparts by a wide margin, particularly when the task and issues were distributive and incentives were large. Our results help to identify the underlying dynamics of the information dilemma and lead to a discussion of the connections between information and social dilemmas and the potential for avoiding inefficiencies.