Bershadskyy, D., Sachs, F. E., & Weimann, J. (2023). Collective bargaining in a shrinking group game: The role of information and communication. Journal of Economic Behavior & Organization, 209, 391–410. https://doi.org/10.1016/J.JEBO.2023.03.009
In this article we examine collective bargaining dynamics using the "pirate game," a strategic experiment where hierarchical players negotiate the division of a fixed endowment. The study investigates the effects of communication and information on bargaining outcomes, focusing on pivotal players who hold decision-making power. Our central results are:
Equilibrium Awareness: Players provided with information about the subgame perfect equilibrium (SPE) exploited their pivotal roles more effectively, demanding higher shares compared to uninformed participants.
Role of Communication: Communication among pivotal players fostered in-group cohesion, leading to greater alignment and benefits for these players at the expense of non-pivotal participants. When communication included all players, the outcomes leaned towards fairness but still reflected the influence of pivotal group dynamics.
Experimental Insights: The presence of pre-play communication reduced social distance and strengthened group identity, impacting proposal fairness and acceptance rates. Sequential communication between subgroups followed by larger group discussions moderated the dominance of pivotal players.
In this study we highlight how strategic information and group dynamics shape outcomes in negotiations, offering implications for real-world multi-party bargaining, such as coalition politics or organizational decision-making.