Channel Negotiations with Information Asymmetries: Contingent Influences of Communication and Trustworthiness Reputations

Abstract

This article reports three experiments that examine how communication types (informational, relational, and coercive messages) and mutual trustworthiness reputations influence sequential bargaining between an uncertain manufacturer and an informed distributor in a marketing channel. In Experiment 1, bargainers use informational and relational messages to establish a positive social tenor in the interaction. Compared with when bargainers communicate only through offers and counteroffers, explicit communication produces quicker and more efficient agreements. The effects are stronger when manufacturer uncertainty is relatively high. In Experiment 2, mutual reputations of high (versus low) trustworthiness also produce quicker and more efficient agreements. In both studies, the larger extracted surplus increases manufacturer profits without affecting distributor profits. However, contrary to economic intuition, the gains from communication accrue asymmetrically to the uninformed manufacturer. Experiment 3 shows the effects of communication type are contingent on the prevailing level (high or low) of trustworthiness reputations in the dyad. Compared with no communication, relational messages elicit the most positive (negative) outcomes when trustworthiness reputations are high (low). Informational messages have a smaller but positive impact on bargaining outcomes in both trustworthiness conditions and appear to build trust.