Working Paper: NBER ID: w27984
Authors: Matthew Backus; Thomas Blake; Jett Pettus; Steven Tadelis
Abstract: Bargaining breakdown—whether as delay, conflict, or missing trade—plagues bargaining in environments with incomplete information. Can a bargaining environment that facilitates or restricts communication alleviate these costs? We exploit a unique opportunity to study this question using real market transactions: eBay Germany’s Best Offer platform. On May 23, 2016, the platform introduced unstructured communication allowing buyers and sellers on the desktop version of the site, but not the mobile app, to accompany price offers with a message. Using this natural experiment, our difference-in-differences approach documents a 14% decrease in the the rate of breakdown among compliers. Though adoption is immediate, the effect is not. We show, using text analysis, that the dynamics are consistent with repeat players learning how to use communication in bargaining, and that the messaging strategies of experienced sellers are correlated with successful bargaining.
Keywords: Bargaining; Communication; eBay; Natural Experiment; Negotiation
JEL Codes: C78; D82; D83; M21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of messaging (Y20) | Decrease in bargaining breakdown (C79) |
| Messaging effectiveness grows over time (L96) | Improved bargaining outcomes (C78) |
| Communication (L96) | Enhanced likelihood of successful transactions (L14) |