Fairness and Bargaining Efficiency Under Deadlines
Author | : Masahiro Yoshida |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
ISBN-10 | : OCLC:1398455400 |
ISBN-13 | : |
Rating | : 4/5 (00 Downloads) |
Book excerpt: Monopolists often exploit a deadline to boost their bargaining power, but historically, experiments document significant compromises in ultimatums. Motivated by this gap between theory and the real world, I explore whether the market designer can leverage the fairness of the monopolist to restore the extracted bargaining efficiency. Employing a durable goods monopolist model under a deadline, I show that a threat of an earlier breakdown facilitates a trade by triggering a compromise even from the rational monopolist. I test these insights in approximately 1,200 pieces of randomly matched trade data from a laboratory experiment to find that the threat device is even more robustly effective; a non-zero threat augments the overall efficiency from shrinking delays until agreement and deterring breakdowns by inciting the fairness of monopolists.