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Patience Is Power: Bargaining and Payoff Delay

Author

Listed:
  • Jeongbin Kim
  • Wooyoung Lim
  • Sebastian Schweighofer-Kodritsch
Abstract
We provide causal evidence that patience is a significant source of bargaining power. Generalizing the Rubinstein (1982) bargaining model to arbitrarily non-stationary discounting, we first show that dynamic consistency across bargaining rounds is sufficient for a unique equilibrium, which we characterize. We then experimentally implement a version of this game where bargaining delay is negligible (frequent offers, so dynamic consistency holds by design), while payoff delay is significant (a week or month per round of disagreement, with or without front-end delay). Our treatments induce different time preferences between subjects by randomly assigning individuals different public payoff delay profiles. The leading treatment allows to test for a general patience advantage, predicted independent of the shape of discounting, and it receives strong behavioral support. Additional treatments show that this advantage hinges on the availability of immediate payoffs and reject exponential discounting in favor of present-biased discounting.

Suggested Citation

  • Jeongbin Kim & Wooyoung Lim & Sebastian Schweighofer-Kodritsch, 2023. "Patience Is Power: Bargaining and Payoff Delay," Berlin School of Economics Discussion Papers 0015, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0015
    DOI: 10.48462/opus4-4946
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    References listed on IDEAS

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    More about this item

    Keywords

    Alternating-Offers Bargaining; Time Preferences; Present Bias; Laboratory Experiments;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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