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Universität zu Köln
Wirtschafts- und Sozialwissenschaftliche Fakultät

Staatswissenschaftliches Seminar - Prof. Schmitz

Cooling-Off in Negotiations - Does It Work?

Jörg Oechssler, Andreas Roider, and Patrick W. Schmitz

Journal of Institutional and Theoretical Economics, Vol. 171 (4), 2015, 565-588.

Abstract. Negotiations frequently end in conflict after one party rejects a final offer. In a large-scale internet experiment, we investigate whether a 24-hour cooling-off period leads to fewer rejections in ultimatum bargaining. We conduct a standard cash treatment and a lottery treatment, where subjects receive lottery tickets for several large prizes - emulating a high-stakes environment. In the lottery treatment, unfair offers are less frequently rejected, and cooling-off significantly reduces the rejection rate further. In the cash treatment, rejections are more frequent and remain so after cooling-off. This treatment difference is particularly pronounced for subjects with lower cognitive abilities.

The working paper version is available for download (CEPR Discussion Paper 6807).