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Mediation in Bargaining: Evidence from Large-Scale Field Data on Business-to-Business Negotiations by Brad Larsen (Stanford), Carol Lu (Stanford), and Anthony Zhang (Chicago)

Office of Alumni and External Relations    2020-07-20

Mediation in Bargaining: Evidence from Large-Scale Field Data on Business-to-Business Negotiations by Brad Larsen (Stanford), Carol Lu (Stanford), and Anthony Zhang (Chicago)


Guest:Brad Larsen, Assistant Professor, Stanford University

Host:Li Shuwen, Assistant Professor

Time:Wednesday, Jul 22th, 2020, 11:00-12:30

Venue:ZOOM

 

Abstract:

We analyze a dataset containing hundreds of thousands of full alternating-offer, business-to-business negotiations in the wholesale used-car market, with each negotiation mediated (over the phone) by a third-party company. The data shows the identity of the employee mediating the negotiations, and these mediators are quasi-randomly assigned to the bargaining pair. We find mediator's identities matter: high-performing mediators are 23.23% more likely to close a deal than low-performers. Experience is correlated with better mediator performance. Male and female mediators perform equally well, but mediate differently: female mediators close deals faster and at prices more favorable to buyers. Good mediators appear to respond to long-term company incentives rather than short-term incentives to close a given deal and they can do even better at reaching agreement for threads with ex-ante lower probability of trade. We provide a new decomposition of mediator effectiveness, demonstrating that effective mediators improve bargaining outcomes by causing buyers and sellers to come to agreements faster, not by causing buyers and sellers to be more persistent. We also show that better mediators appear less reliant on exploiting certain types of behavioral biases.

Bio

Brad Larsen is an assistant professor in the Department of Economics at Stanford University. His primary research area is industrial organization, with specific focuses on bargaining, occupational licensing, auctions, consumer search, online markets, grey market activity, and trade. Before joining Stanford, Brad spent one year as a postdoctoral research scientist at eBay Research Labs. He received his BA in economics and BS in mathematics from Brigham Young University and his PhD in economics from MIT.   


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