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Focal points in tacit bargaining problems: Experimental evidence

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  • Isoni, Andrea
  • Poulsen, Anders
  • Sugden, Robert
  • Tsutsui, Kei

Abstract

We use a new experimental design to test Schelling's hypotheses about the nature and effectiveness of focal points in tacit bargaining problems. In our design, as in many real-world bargaining problems, each player's strategies are framed as proposals about what part of a stock of valuable objects she is to take, and there are payoff-irrelevant cues which define relations between players and objects. In line with Schelling's hypotheses, we find that such cues serve as powerful focal points. Their presence increases efficiency even in games where there is no efficient and equal division, and induces systematically unequal payoff distributions.

Suggested Citation

  • Isoni, Andrea & Poulsen, Anders & Sugden, Robert & Tsutsui, Kei, 2013. "Focal points in tacit bargaining problems: Experimental evidence," European Economic Review, Elsevier, vol. 59(C), pages 167-188.
    • Handle: RePEc:eee:eecrev:v:59:y:2013:i:c:p:167-188
    DOI: 10.1016/j.euroecorev.2012.12.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Tacit bargaining; Relational cue; Payoff-irrelevant cue; Focal point;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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