Unity suggests strength: An experimental study of decentralized and collective bargaining

Abstract

In an experiment, two players bargain with a third party, either separately or collectively after forming a joint venture. Our theoretical benchmark solution predicts decentralized bargaining, as only one of the players has an interest in forming a joint venture. However, we observe a significant share of collective bargaining. When compared with decentralized bargaining, centralization has no significant effect on the payoffs of the merged partners, but reduces the payoff of the third player due to more frequent conflicts caused by higher ambitions of the merged party. © 2003 Elsevier Science B.V. All rights reserved.