Negotiating in the Dark: How Information Structures Bargaining Behaviour

Abstract: We investigate how the presence of contextual information about prior agreements influences bargaining behaviour. More specifically, we focus on how information availability affects key elements of negotiation dynamics, including first offers, counteroffers, concession patterns, and the likelihood of reaching an agreement, by enabling shared standards of reasonableness that allow negotiators to evaluate what is plausible or acceptable. To this end, we conducted an experiment in which 122 participants engaged in a simulated price negotiation. Holding the economic structure of the task constant, we examine how differences in informational context shape negotiation behaviour and negotiation breakdowns. Our results show that contextual information is associated with less extreme and less variable first offers, more calibrated counteroffers, and more structured concession dynamics. These findings highlight how information structures bargaining behaviour and help explain why negotiations conducted without relevant information are more likely to unfold in erratic, uncoordinated, and more costly ways.

Keywords: First offer; counteroffer; concessions; contextual information; standards of reasonableness.