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Bounded rationality in laboratory bargaining with asymmetric information

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  • Timothy Cason

    ()

  • Stanley Reynolds

Abstract

This paper reports an experiment on two-player sequential bargaining with asymmetric information that features some forces present in multi-round monopoly pricing environments. Buyer-seller pairs play a series of bargaining games that last for either one or two rounds of offers. The treatment variable is the probability of continuing into a second round. Equilibrium predictions do a poor job of explaining levels of prices and treatment effects. As an alternative to the conventional equilibrium model, we consider models that allow for bounded rationality of subjects. The quantal response equilibrium model captures some of the important features of the results. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s00199-003-0464-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 25 (2005)
Issue (Month): 3 (04)
Pages: 553-574

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Handle: RePEc:spr:joecth:v:25:y:2005:i:3:p:553-574

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Related research

Keywords: Laboratory; Durable goods monopoly; Logit equilibrium.;

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Cited by:
  1. Potters, J.J.M. & Sefton, M. & Vesterlund, L., 2007. "Leading-by-example and signaling in voluntary contribution games: An experimental study," Open Access publications from Tilburg University urn:nbn:nl:ui:12-302954, Tilburg University.
  2. Philip A. Haile & Ali Hortacsu & Grigory Kosenok, 2006. "On the Empirical Content of Quantal Response Equilibrium," Working Papers w0076, Center for Economic and Financial Research (CEFIR).
  3. Sean Crockett, 2008. "Learning competitive equilibrium in laboratory exchange economies," Economic Theory, Springer, vol. 34(1), pages 157-180, January.

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