Mediation in Bargaining: Evidence from Large-Scale Field Data on Business-to-Business Negotiations

We analyze a dataset containing hundreds of thousands of full alternating-offer, business-to-business negotiations in the wholesale used-car market, with each negotiation mediated (over the phone) by a third-party company. The data shows the identity of the employee mediating the negotiations, and these mediators are quasi-randomly assigned to the bargaining pair. We find mediator’s identities matter: high-performing mediators are 23.23% more likely to close a deal than low-performers. Experience is correlated with better mediator performance. Male and female mediators perform equally well, but mediate differently: female mediators close deals faster and at prices more favorable to buyers. Good mediators appear to respond to long-term company incentives rather than short-term incentives to close a given deal and they can do even better at reaching agreement for threads with ex-ante lower probability of trade. We provide a new decomposition of mediator effectiveness, demonstrating that effective mediators improve bargaining outcomes by causing buyers and sellers to come to agreements faster, not by causing buyers and sellers to be more persistent. We also show that better mediators appear less reliant on exploiting certain types of behavioral biases. 1Larsen: Stanford University and NBER; bjlarsen@stanford.edu. Lu: Stanford University; hhlu@stanford.edu. Zhang: University of Chicago Booth School of Business; anthony.zhang@chicagobooth.edu