Arbitration and Bargaining across the Pacific

This paper reports laboratory experiments comparing arbitration behavior between and across two countries with extensive trade relations, the United States and Japan. Besides comparing disputes in both locations, we evaluate disputes between them. While we find nominal differences between the countries, we observe significant changes in both groups' behavior when facing someone from the other country. Specifically, Americans seek larger profits when facing a Japanese counterpart and Japanese subjects settle more frequently with an American counterpart. Our results suggest that the literature on bargaining behavior across cultures paints an incomplete picture of international comparisons by failing to consider bargaining interactions.