Using Collaborative Bargaining to Develop Environmental Policy when Information is Private

by Bruce, Christopher and Jeremy Clark

In many cases governments invite interest groups to use collaborative bargaining to resolve environmental conflicts. If the parties fail to reach agreement, the government threatens to impose a backstop policy. Bargaining models have predicted that any agreements will be influenced, variously, by self-interest, equity, or entitlement (to the status quo). Although most such models assume that the parties are well informed about one another’s utility functions, this assumption conflicts with the reality of negotiations over environmental policy. We develop a laboratory experiment to investigate the impact of private information. Subjects who bargain under this constraint are almost as likely to reach (approximately efficient) agreements as those bargaining under full information. We also find that equity plays a less important role, and entitlement a more important role, under private information than under full information. There is only limited evidence to suggest that parties are drawn to the Nash bargain.

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