We conduct an experimental analysis of bargaining under asymmetric information, where the dispute resolution mechanism can be interpreted as either a civil trial or conventional arbitration. In our treatment, we allow for credible and costless transmission of private information. Consistent with the theory, we find that plaintiffs with strong cases tend to reveal their private information to the defendant. As a result, this group of plaintiffs experiences a significant drop in their dispute rate under the treatment. We also consider a cheap‐talk treatment under which transmitted information is not credible. When cheap talk is allowed, transmitted messages are not entirely ignored, but there is no reduction in the dispute rate for plaintiffs with strong cases.
- Pretrial Bargaining,
- Asymmetric Information,
- Bargaining Experiment
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