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Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining

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Author Info

  • Johnson, Eric J.
  • Camerer, Colin
  • Sen, Sankar
  • Rymon, Talia

Abstract

We ran three-round sequential bargaining experiments in which the perfect equilibrium offer was $1.25 and an equal split was $2.50. Subjects offered $2.11 to other subjects, $1.84 to "robot" players (who are known to play subgame perfectly), and $1.22 to robots after instruction in backward induction. Measures of information search showed that subjects did not look at the amounts being divided in different rounds in the correct order, and for the length of time, necessary for backward induction, unless they were specifically instructed. The results suggest that most of the departure from perfect equilibrium is due to limited computation and some is due to fairness.

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Bibliographic Info

Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1040.

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Length: 38 pages
Date of creation: Jun 1998
Date of revision:
Publication status: Published: Journal of Economic Theory , Vol. 104, (2002), 6-47
Handle: RePEc:clt:sswopa:1040

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Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
Phone: 626 395-4065
Fax: 626 405-9841
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Web page: http://www.hss.caltech.edu/ss

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Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
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Cited by:
  1. Frederic Koessler & Charles Noussair & Anthony Ziegelmeyer, 2007. "Information Aggregation and Beliefs in Experimental Parimutuel Betting Markets," Jena Economic Research Papers 2007-033, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Miguel Costa-Gomes & Vincent P. Crawford, 2004. "Cognition And Behavior In Two-Person Guessing Games: An Experimental Study," Levine's Bibliography 122247000000000143, UCLA Department of Economics.
  3. Giovanna Devetag & Andreas Ortmann, 2006. "When and Why? A Critical Survey on Coordination Failure in the Laboratory," CEEL Working Papers 0605, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  4. Robert S. Gazzale & Tapan Khopkar, 2008. "Remain Silent and Ye Shall Suffer: Seller Exploitation of Reticent Buyers in an Experimental Reputation System," Department of Economics Working Papers 2008-22, Department of Economics, Williams College.
  5. Glenn W Harrison, 2008. "Neuroeconomics: A Critical Reconsideration," Levine's Working Paper Archive 122247000000001915, David K. Levine.
  6. Robert Slonim, 2005. "Competing Against Experienced and Inexperienced Players," Experimental Economics, Springer, vol. 8(1), pages 55-75, April.

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