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A bargaining experiment on heterogeneity and side deals in climate negotiations.

ABSTRACT: The recent global climate change agreement in Paris leaves a wide gap between pledged and requisite emissions reductions in keeping with the commonly accepted 2 °C target. A recent strand of theoretical and experimental evidence establishes pessimistic predictions concerning the ability of comprehensive global environmental agreements to improve upon the business-as-usual trajectory. We introduce an economic experiment focusing on the dynamics of the negotiation process by observing subjects' behavior in a Nash bargaining game. Throughout repeated rounds, heterogeneous players bargain over the allocation of a fixed amount of profit-generating emissions with significant losses attached to prolonged failure to reach agreement. We find that the existence of side agreements that constrain individual demands among a subset of like countries does not ensure success; however, such side agreements reduce the demands of high-emission parties. Our results highlight the importance of strong signals among high emitters in reaching agreement to shoulder a collective emission reduction target.

SUBMITTER: Gosnell G

PROVIDER: S-EPMC6991966 | biostudies-literature |

REPOSITORIES: biostudies-literature

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Project description:BACKGROUND:The necessity to measure and reward "value for money" of new pharmaceuticals has become central in health policy debates, as much as the requirement to assess the "willingness to pay" for an additional, quality-adjusted life year (QALY). There is a clear need to understand the capacity of "value-based" pricing policies to impact societal goals, like timely access to new treatments, sustainable health budgets, or incentivizing research to improve patient outcomes. Not only the pricing mechanics, but also the process of value assessment and price negotiation are subject to reform demands. This study assesses the impact of a negotiation situation for life-extending pharmaceuticals on societal outcomes. Of interest were general effects of the bargaining behaviour, as well as differences caused by the assigned role and the magnitude of prices. METHODS:We ran an online experiment (n?=?404) on Amazon Mechanical Turk (MTurk). Participants were randomly assigned into four treatment groups for a reimbursement negotiation between two roles (health minister, pharma representative) in two price framings. Payoff to players consisted of a fixed salary and a potential bonus, depending on their preferences, their price offer and the counter offer of a randomly paired negotiation partner. Success had real social consequences on other MTurk users (premium payers, investors) and via donations to a patient association. RESULTS:Margins between reservation prices and price offers increased throughout the game. Yet, 47% of players reduced at least once and 15% always their bonus probability to zero in favour of an agreement. 61% of simulated negotiation pairs could have reached an agreement, based on their preferences. 63% of these were successful, leaving 61% of patients with no access to the new treatment. The group with "real world" prices had lower prices and less agreements than the unconverted payoff group. The successful markets redistributed 20% of total assets from premium payers to investors over five innovation cycles. CONCLUSIONS:The negotiation situation for pharmaceutical reimbursement has notable impact on societal outcomes. Further research should evaluate policies that align preferences and increase negotiation success.

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A bargaining experiment on heterogeneity and side deals in climate negotiations.

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