Artifacts in the Siegel-Fouraker Study of Bargaining and Group Decision Making

Siegel and Fouraker (1960) hypothesize and purport to show experimentally that players in bilateral monopoly will tend toward contracts at the Paretian optimum quantity (P.O.) under conditions of incomplete information (players know only their own payoff functions), even though the theory implicitly assumes complete information (both players know both functions). Their results contain artifacts which severely limit the generality of any inferences that might be drawn from them. The theory prediction that players will tend toward P.O. must be based on the explicit, not implicit, assumption of complete information. In this paper it is demonstrated that under conditions of incomplete information it is very likely that players will tend toward contracts at the P.O. only when it can be assumed that they meet the very restrictive condition of behaving like perfect competitors. Also, in an experiment measuring the degree to which players did in fact bid along their marginal functions, some 48% of the variance in behavior was explained by this model.