DP5817 (In)Transparency of Information Acquisition: A Bargaining Experiment

Author(s): Thomas Gehrig, Werner Güth, René Levínsky
Publication Date: September 2006
Keyword(s): information acquisition, transparency, ultimatum experiment
JEL(s): C91, D82
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5817

We analyze how transparency affects information acquisition in a bargaining context, where proposers may chose to purchase information about the unknown outside option of their bargaining partner. Although information acquisition is excessive in all our scenarios we find that the bargaining outcome depends crucially on the transparency of the bargaining environment. In transparent games, when responders can observe whether proposers have acquired information, acceptance rates are higher. Accordingly, in transparent bargaining environments information is more valuable, both individually and socially.