Mediation in Bargaining: Evidence From Large-Scale Field Data on Business-to-Business Negotiations

We analyze a new dataset containing hundreds of thousands of full alternating offer, business-to-business negotiations in the wholesale used-car market, with each negotiation mediated (over the phone) by a third-party company. The data allows us to observe the identity of the employee mediating the negotiations, and these mediators are quasi-randomly assigned to the car/bargaining pair. We find that the mediator’s identity matters: high-performing mediators are 23.23% more likely to close a deal than low-performing ones. Experience (as measured by tenure in the industry) is correlated with better mediator performance. Male and female mediators perform equally well, but mediate differently: female mediators close deals faster and at prices more favorable to buyers than male mediators. Good mediators appear to respond to long-term company incentives rather than short-term incentives to close a given deal. We provide a new decomposition of mediator effectiveness, demonstrating that effective mediators improve bargaining outcomes by causing buyers and sellers to come to agreements faster, not by causing buyers and sellers to be more persistent.