The way we use communication is determinant for the outcomes we can achieve and the way we can influence other people's involvement in such outcomes. In situations of conflict, where one's interest is not aligned to that of our counterpart, such as cases of competition, communication can be used to gain power. Threats are a way to do so. We can threat our counterpart that unless she behaves in the way we want her to, we are willing to risk our wellbeing in order to punish her. In this project we study the effect of threats and promises as a mechanism of commitment that helps gain bargaining power in settings of conflict.
This project has lead to two papers. A theoretical paper (The strategic role of non-binding communication) and an experimental paper (The bargaining power of commitment: An experiment on the effects of threats in the sequential Hawk-Dove game). You can see more details below.
The Use of Threats to Gain Advantage
The Strategic Role of Non-Binding Communication
with Luis Alejandro Palacio and Alexandra Cortés
Abstract: This article studies the conditions that improve bargaining power using threats and promises. We develop a model of strategic communication, based on the conflict game with perfect information, in which a noisy commitment message is sent by a better-informed sender to a receiver who takes an action that determines the welfare of both. Our model captures different levels of aligned-preferences, for which classical games such as stag hunt, hawk-dove and prisoner’s dilemma are particular cases. We characterize the Bayesian Perfect Equilibrium with non-binding messages under truth-telling beliefs and sender’s bargaining power assumptions. Through our equilibrium selection we show that the less conflict the game has, the more informative the equilibrium signal is and less credibility is necessary to implement it.
Abstract: This article studies experimentally the conditions that improve bargaining power by means of threats. The analysis centers on three essential elements of the commitment: the possibility of announcing one’s actions, the credibility of these messages, and the experience acquired in the negotiation process. For this, we chose the sequential hawk-dove game due to the fact that it is a negotiation environment with a non-equitable distribution of payoffs in equilibrium. The empirical evidence of our experiment shows that, in the first period, subjects do not realize the bargaining power of the commitment. When the game is repeated and experience increases, senders understand that using threats can work in their favor and increase their payoffs. The credibility of the messages is also relevant for the strategic move. It is common to find subjects that are strategic liars, who lose bargaining power for this behavior.
The bargaining power of commitment: An experiment of the effects of threats in the sequential hawk-dove game
with Luis Alejandro Palacio and Alexandra Cortés
