UCLA

Abstract: People respond quickly when they have a clear preference and slowly when they are close to indifference. The question is whether others exploit this tendency to infer private information. In two-stage bargaining experiments, we observe that the speed with which buyers reject sellers’ offers decreases with the size of the foregone surplus. This should allow sellers to infer buyers’ values from response times, creating an incentive for buyers to manipulate their response times. We experimentally identify distinct conditions under which subjects do, and do not, exhibit such strategic behaviour. These results provide the first insight into the possible use of response time as a strategic variable.