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Efficiency in Bargaining Games with Alternating Offers

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  • Vjollca Sadiraj

    ()
    (Georgia State University)

  • Juan Sun

    ()
    (Georgia State Univeristy)

Abstract

Bargaining games model situations in which the realization of potential benefits is jeopardized by conflicting bargaining powers. Most of the literature on bargaining behavior focuses on bargaining over gains. Exploration of behavior in situations under which agents bargain over losses has received only limited attention from the profession. An important question is whether the negative effect of competing bargaining powers on the efficiency of agreements is more severe in bargaining over gains or over losses. Another understudied research question is how the likelihood that the outcome of a negotiation will actually be implemented affects efficiency of bargaining. We design an experiment that addresses these two questions. We find that in alternating offers games, outcomes of bargaining over gains are more efficient than outcomes of bargaining over losses. We also find that the likelihood that an interaction is implemented has a positive effect on the efficiency of bargaining.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 3 ()
Pages: 2366-2374

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Handle: RePEc:ebl:ecbull:eb-12-00497

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Keywords: Efficiency; Bargaining; Experiments; Payoff Protocols;

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  1. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  2. James Andreoni & Emily Blanchard, 2006. "Testing subgame perfection apart from fairness in ultimatum games," Experimental Economics, Springer, vol. 9(4), pages 307-321, December.
  3. Ken Binmore, 2007. "Does Game Theory Work? The Bargaining Challenge," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026074, December.
  4. Jayson L. Lusk & M. Darren Hudson, 2010. "Bargaining Over Losses," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 83-91.
  5. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, April.
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