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Information, Uncertainty, and Subjective Entitlements in Bargaining

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  • Emin Karagözoglu
  • Arno Riedl

Abstract

More often than not production processes are the joint endeavor of people having different abilities and productivities. Such production processes and the associated surplus production are often not fully transparent in the sense that the relative contributions of involved agents are blurred; either by lack of information about the actual performance of collaborators or because of random noise in the production process or both. These variables likely influence the surplus sharing negotiations following the production. By means of a laboratory experiment, we systematically investigate their role for the whole bargaining process from opening offers to (dis)agreements and find that uncertainties in surplus production and (even) a very coarse performance information lead to bargaining asymmetries. In addition, we find that bargainers’ subjective entitlements are also influenced by performance information and the randomness inherent in the production process. These differences in subjective entitlements together with the differences in entitlements between better and worse performers influence the whole bargaining process and significantly contribute to the differences in bargaining outcomes.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3133.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3133

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Keywords: bargaining; performance information; randomness in production process; entitlements; experiments;

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References

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  1. Roth, Alvin E & Murnighan, J Keith & Schoumaker, Francoise, 1988. "The Deadline Effect in Bargaining: Some Experimental Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 78(4), pages 806-23, September.
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Cited by:
  1. Anita Gantner & Rudolf Kerschbamer, 2013. "Fairness and Efficiency in a Subjective Claims Problem," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2013-30, Faculty of Economics and Statistics, University of Innsbruck.
  2. Anita Gantner & Kristian Horn & Rudolf Kerschbamer, 2013. "Fair Division in Unanimity Bargaining with Subjective Claims," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2013-31, Faculty of Economics and Statistics, University of Innsbruck.
  3. Mitesh Kataria & Natalia Montinari, 2012. "Risk, Entitlements and Fairness Bias: Explaining Preferences for Redistribution in Multi-person Setting," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2012-061, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Michael Funke & Yu-Fu Chen & Aaron Mehrota, 2011. "Global warming and extreme events: Rethinking the timing and intensity of environment policy," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 21105, Hamburg University, Department of Economics.
  5. Chen, Yu-Fu & Funke, Michael, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2010-48, Scottish Institute for Research in Economics (SIRE).

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