Dyadic processes of disclosure and reciprocity in bargaining with communication

McGinn, K. L., Thompson, L. & Bazerman, M.(2003). Dyadic processes of disclosure and reciprocity in bargaining with communication. Journal of Behavioral Decision Making, 16, 17-34.

Abstract

We offer a study revealing the mechanisms through which communication helps actual bargaining behavior outperform economic predictions. The possibility of individually strategic behavior in the presence of private information leads to game-theoretic predictions of less than full efficiency. Yet, when parties are allowed to communicate prior to placing their bids in a double auction in which buyers and the sellers have independent, privately held valuations for the item being sold, we find nearly full efficiency (98%). We identify three efficiency-enhancing, dyadic behaviors (rather than the standard individual strategies) made possible with communication: 1) coordination on a single price; 2) mutual bidding of values; and 3) mutual revelation of values. We present evidence that disclosure and reciprocity comprise the social psychological foundation of these dyadic strategies.