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Patience Is Power: Bargaining and Payoff Delay

  • 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.

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Metadaten
Document Type:Working Paper
Language:English
Author(s):Jeongbin Kim, Wooyoung Lim, Sebastian Schweighofer-KodritschORCiD
Parent Title (English):Berlin School of Economics Discussion Papers
Hertie Collections (Serial Number):Berlin School of Economics Discussion Papers (15)
Publication year:2023
Publishing Institution:Hertie School
Number pages:56
Related URL:https://berlinschoolofeconomics.de/insights/bse-discussion-papers
DOI:https://doi.org/10.48462/opus4-4946
Release Date:2023/05/09
Edition:No. 15
Hertie School Research:BerlinSchoolOfEcon_Discussion_Papers
Licence of document (German):Creative Commons - CC BY - 4.0 International
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