Transparency Versus Back-Room Deals in Bargaining

Creators: Agranov, Marina; Tergiman, Chloe

Abstract

We design an experiment to study the effects of transparency on bargaining processes. We show that whether transparency arises endogenously depends on the degree of competition between subjects. In a competitive setting there is no transparency: subjects use private communication channels to compete for favors from those in power and establish backroom deals. In the absence of competition the bargaining process is transparent: subjects communicate publicly and outcomes are more egalitarian. We further show that in a competitive setting, imposing transparency by requiring all communication to be public reduces the observed competition between subjects and leads to more egalitarian outcomes.

Additional Information

This research was made possible thanks to generous grant support from the Social Science Humanities and Research Council. The authors would like to thank Pedro Dal Bo, Gary Bolton, Alessandra Casella, Timothy Cason, Eric Dickson, Sanford Gordon, Alessandro Lizzeri, Rebecca Morton, Muriel Niederle, as well as the seminar participants at Florida State University, London School of Economics, Penn State University, Purdue University, Stanford University, the University of British Columbia, and finally the conference participants of the Economic Science Association (2013), the Public Choice Meetings (2014), the Royal Economic Society (2014) and the Design and Bargaining Workshop in Dallas (2014).

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