Bargaining with voluntary transmission of private information: An experimental analysis of final offer arbitration

2021 ◽  
Vol 191 ◽  
pp. 334-366
Author(s):  
Paul Pecorino ◽  
Michael Solomon ◽  
Mark Van Boening
Keyword(s):  
Private Information ◽  
Experimental Analysis ◽  
Final Offer

Costly Voluntary Disclosure in a Signaling Game

2019 ◽  
Vol 15 (2) ◽  
Author(s):  
Paul Pecorino ◽  
Mark Van Boening
Keyword(s):  
Private Information ◽  
Experimental Analysis ◽  
Voluntary Disclosure ◽  
Signaling Game ◽  
Strong Case

Abstract We conduct an experimental analysis of pretrial bargaining, while allowing for the costly disclosure of private information in a signaling game. Under the theory, 100 % of plaintiffs with a weak case are predicted to remain silent, while 100 % of the plaintiffs with a strong case are predicted to voluntarily disclose their type. We find that 75 % of weak plaintiffs remain silent and 67 % of strong plaintiffs reveal their type. In line with theory, weak plaintiffs who reveal their type receive a lower payoff, while strong plaintiffs who reveal their type receive a higher payoff. Plaintiffs with a strong case who reveal their type have a dispute rate which is 50 % points lower than strong plaintiffs who remain silent. Because plaintiffs who reveal their type cannot extract the entire surplus from settlement from the defendant, the incentive to engage in voluntary disclosure is weaker empirically than it is in theory.

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