Waiting for the Right Offer: Laboratory Evidence on How News Affects Bargaining

We conduct a series of laboratory experiments to examine whether the gradual exogenous revelation of sellers’ private information influences the occurrence of trades in a bilateral bargaining setting with a static lemon condition. We find that, although information does not increase efficiency, it reduces the likelihood that buyers incur losses when trading with low-quality sellers. Anticipating that additional signals will arrive, buyers hesitate to finalize deals immediately and exhibit a “waiting for news” effect, making sizable offer adjustments only when sufficient positive signals have accumulated. In contrast, informed sellers are less sensitive to news but appear to wait for the offer that they deem acceptable.

This paper was accepted by Dorothea Kübler, behavioral economics and decision analysis.

Funding: T. Ding initiated this project while at the Shanghai University of Finance and Economics and thanks the National Natural Science Foundation of China [Grant 72173076] for financial support. S. F. Lehrer thanks the Social Science and Humanities Research Council of Canada for research support.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.07224.