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Demonstration of power: Experimental results on bilateral bargaining

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  • Navarro, Noemí
  • Veszteg, Róbert F.

Abstract

We test the empirical effectiveness of two theoretical proposals to equilibrate bargaining power in bilateral bargaining. Our experimental design is based on the two-player versions of the multibidding game (Pérez-Castrillo & Wettstein, 2001) and the bid-and-propose game (Navarro & Perea, 2005). Both models build on the ultimatum game and balance parties’ bargaining power by auctioning the role of the proposer in the first stage. We find that proposers learn how to send an acceptable proposal by trial and error, guided by responders’ rejections. The observed behavior stabilizes for the final experimental rounds and the payoff gap between the proposer and the responder seems to close down. However, the strategies chosen by subjects are remarkably different from the theoretical ones.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 32 (2011)
Issue (Month): 5 ()
Pages: 762-772

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Handle: RePEc:eee:joepsy:v:32:y:2011:i:5:p:762-772

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Related research

Keywords: Bargaining; Experiments; Fairness; Myerson value; Shapley value;

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  1. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
  2. Forsythe Robert & Horowitz Joel L. & Savin N. E. & Sefton Martin, 1994. "Fairness in Simple Bargaining Experiments," Games and Economic Behavior, Elsevier, vol. 6(3), pages 347-369, May.
  3. Uri Gneezy & Aldo Rustichini, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
  4. David Pérez-Castrillo & David Wettstein, . "Bidding For The Surplus: A Non-Cooperative Approach To The Shapley Value," UFAE and IAE Working Papers 461.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  6. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
  7. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  8. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  9. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  10. Yi, Kang-Oh, 2005. "Quantal-response equilibrium models of the ultimatum bargaining game," Games and Economic Behavior, Elsevier, vol. 51(2), pages 324-348, May.
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Cited by:
  1. Geller, Chris R. & Mustard, Jamie & Shahwan, Ranya, 2013. "Focused power: Experiments, the Shapley-Shubik power index, and focal points," Economics Discussion Papers 2013-42, Kiel Institute for the World Economy.

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