Confrontation Costs in Negotiations: Bargaining Under the Veil of a Screen

ABSTRACT:  In negotiations the objectives of parties are generally in conflict. Confronting this conflict can trigger negative emotions, such as nervousness, embarrassment or awkwardness, which I denote as confrontation costs. In this paper, I run a lab experiment to explore whether these costs shape the decision to engage in negotiations, and how this depends on the communication channel. I find that when participants can opt-out from negotiations, over 28% of times they avoid bargaining, even if opting-in delivers higher monetary payoffs. Moreover, when negotiations are face-to-face instead of electronic, the probability of avoiding them roughly doubles, due to higher confrontation costs. This makes electronic bargaining an effective way of fostering negotiations while improving participants' total welfare. When I analyze differences by gender, I find that women are more reluctant to bargain than men, and that they suffer higher confrontation costs.

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About Andrés: Andrés Gago is an Assistant Professor at the Business School of the Torcuato Di Tella University. He holds a PhD in Economics from CEMFI. His research falls within the field of applied economics, with interests in experimental and behavioral economics, as well as in political economy.