Bargaining with Voluntary Disclosure and Endogenous Matching

We investigate a bargaining setting between an "informed" player, who has private information, and an "uninformed" player. The informed player has the option to truthfully disclose its private information in two unique environments. In the first, the informed player is randomly matched with an uninformed player, and can voluntarily disclose its private information prior to a negotiation taking place. In the second environment, the informed player can voluntarily disclose its private information before any endogenous matching between players (and any subsequent negotiation) takes place. In this latter scenario, the informed player faces a practical tradeoff: revealing its private information in hopes of obtaining a more favorable match versus retaining its information rents for bargaining (and vice versa). In these two settings, we first adopt a theoretical lens and evaluate when it is optimal for an informed player to disclose its private information. Then, because human managers are integral to both negotiations and information disclosure, we test these predictions in a controlled human-subjects experiment. Among other experimental results, when voluntary disclosure does not play a role in matching, we find that (i) disclosure can benefit the informed player, particularly lower types and (ii) sophisticated uninformed players are able to infer the informed player's type from the disclosure decision and exploit this to increase earnings. In contrast, (iii) when voluntary disclosure does play a role in matching, we find that disclosure does not benefit any informed-player type