Working Paper: CEPR ID: DP6807
Authors: Jrg Oechssler; Andreas Roider; Patrick W. Schmitz
Abstract: Negotiations frequently end in conflict after one party rejects a final offer. In a large-scale internet experiment we investigate whether a 24-hour cooling-off period leads to fewer rejections in ultimatum bargaining. We conduct a standard cash treatment and a lottery treatment, where subjects received lottery tickets for several large prizes - emulating a high-stakes environment. In the lottery treatment, unfair offers are less frequently rejected, and cooling-off significantly reduces the rejection rate further. In the cash treatment, rejections are more frequent and remain so after cooling-off. This treatment difference is particularly pronounced for subjects with lower cognitive abilities.
Keywords: behavioural biases; cognitive abilities; cooling off; emotions; internet experiment; negotiations; ultimatum game
JEL Codes: C78; C99; D8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 24-hour cooling off period (Y20) | reduction in rejection rate of unfair offers in high-stakes lottery treatment (C78) |
| cooling off period (Y20) | more rational decision-making (D91) |
| cognitive abilities (G53) | negotiation tactics (C78) |
| impulsive decision-makers (D91) | higher rejection rates (C52) |
| lower CRT scores (C70) | impulsive decisions (D91) |
| impulsive decisions (D91) | higher rejection rates in cash treatment (F35) |
| cooling off effect (G41) | pronounced among impulsive decision-makers (D91) |