Bargaining over treatment choice under disagreement
Date: 2019-05-03 9:00 am – 9:30 am
Last modified: 2019-04-14
Abstract
A group of experts with different prior beliefs must make a collective
decision over the choice of a treatment or policy. We propose a model
where such disagreements are resolved through bargaining. We show
that, when the outcome is determined according to the Nash bargaining
solution, the collective decision is made as if a planner maximized expected
utility with respect to a “compromise belief” that places greater
weight on the more pessimistic experts. In interesting classes of environments,
bargaining leads to an inefficient use of information in a
strong sense: experts receive a lower payoff in every state, and thus for
any prior belief. This inefficiency takes the form of under-reaction to
information. We connect these findings to speculative betting and to
the admissibility of statistical decision procedures.