Using Experiments to Compare the Predictive Power of Models of Multilateral Negotiations

We conduct unstructured negotiations in a laboratory experiment designed to empirically assess the predictive power of three approaches to modeling the multilateral negotiations observed in diverse strategic settings. For concreteness we consider two sellers negotiating with a buyer who wants to make only one trade, with the modeling approaches distinguished by whether the buyer negotiates with the sellers sequentially, simultaneously, or in a “take-it-or-leave-it” fashion. Our experiment features two scenarios within which the three approaches have observationally distinct predictions: a differentiated scenario with one highsurplus and one low-surplus seller, and a homogeneous scenario with identical high-surplus sellers. In both scenarios the buyer tends to trade with a high-surplus seller at terms indistinguishable from those in bilateral negotiations with a high-surplus seller, meaning that introducing a competing seller does not affect the observed terms of trade. Our findings match the predictions from the sequential approach, supporting its use in modeling multilateral negotiations.