The Micro-Dynamics of Coalition Formation

We present an experimental approach to study the micro-dynamics of coalition formation in an unrestricted bargaining environment. Specifically, we investigate a fundamental feature of sequential coalition bargaining models: expectations about future bargaining behavior will influence current bargaining outcomes. To do so, we test the hypothesis that coalition bargaining may lead to inefficient outcomes as agents are unable to effectively commit to preliminary agreements during the bargaining process. We conjecture that communication plays an important role in establishing such commitments. We then experimentally manipulate the communication channels and show that restrictions undermine trust and lead to decreased efficiency.