Experimental Evidence on the Value of Time and Structure in Market Negotiations

This paper reports the results from a multi-attribute market negotiation experiment to study how the structure of the negotiation process influences its efficiency. We found that, conditional on the success of the negotiation, the total value created increased with the time spent negotiating; by working one more minute, negotiators created on average 37 additional value units (1% of the maximal value). However, most of the gains were obtained in the early moments of the negotiation. Using a between-subject design, we analyzed the consequences of (1) guiding negotiations towards early wins, and (2) inviting negotiators to share information about their priority goals. The negociation scenario uses the pharmaceutical market - where prices are regulated and determined by a formalized process – as a relevant real-world setting for a sequential negotiation process. In both treatments, the total value created exceeded the control value by approximately 9% of the maximal value. However, it was essentially the buyer who captured the additional value. Negotiator gender had an impact on the negotiation outcome, with women underperforming compared to men