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Intermediaries in Bargaining: Evidence from Business-to-Business Used-Car Inventory Negotiations

SIEPR
Aug 2021
Working Paper
21-043
By  Bradley J. Larsen, Carol Hengheng Lu, Anthony Lee Zhang
We analyze data on tens of thousands of alternating-offer, business-to-business negotiations in the wholesale used-car market, with each negotiation mediated (over the phone) by a third-party company. The data shows the identity of the employee mediating the negotiations. We find that who intermediates the negotiation matters: high-performing mediators are 22.03% more likely to close a deal than low performers. Effective mediators improve bargaining outcomes by helping buyers and sellers come to agreements faster, not by pushing disagreeing parties to persist, and have real effects on efficiency for some negotiations, overcoming some of the inefficiency inherent in incomplete-information settings.
Publication Keywords: 
bargaining
intermediaries
mediation
incomplete information
alternating offers
inefficiency