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Bargaining and Network Structure: An Experiment

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Author Info
Gary Charness
Margarida Corominas-Bosch & Guillaume R. Frechette

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Abstract

Abstract: We consider bargaining in a bipartite network of buyers and sellers, who can only trade with the limited number of people with whom they are connected. Such networks could arise due to proximity issues or restricted communication flows, as with information transmission of job openings, business opportunities, and transactions not easily regulated by external authorities. We perform an experimental test of a graph-theoretic model that allows us to decompose any two-sided network into simple networks of three types, with unique predictions about equilibrium prices for the networks in our sessions. We begin with two separate simple networks, which are then joined by an additional link. Participants appear to quickly grasp important characteristics of the networks. The results diverge sharply depending on how this connection is made, typically conforming to the theoretical directional predictions. Payoffs can be systematically affected even for agents who are not connected by the new link. We find evidence of a form of social learning the shares (publicly) allocated to others in the past affect what one is willing to accept.

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Publisher Info
Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 653.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:653

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. Jackson, Matthew O. & Kalai, Ehud, 1997. "Social Learning in Recurring Games," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 102-134, October. [Downloadable!] (restricted)
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  5. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-43, August. [Downloadable!] (restricted)
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  6. Chatterjee, Kalyan & Dutta, Bhaskar, 1998. "Rubinstein Auctions: On Competition for Bargaining Partners," Games and Economic Behavior, Elsevier, vol. 23(2), pages 119-145, May. [Downloadable!] (restricted)
  7. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
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  8. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August. [Downloadable!] (restricted)
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  9. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-50, September. [Downloadable!] (restricted)
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  11. Binmore, K & Shaked, A & Sutton, J, 1985. "Testing Noncooperative Bargaining Theory: A Preliminary Study," American Economic Review, American Economic Association, vol. 75(5), pages 1178-80, December. [Downloadable!] (restricted)
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  14. Chwe, Michael Suk-Young, 2000. "Communication and Coordination in Social Networks," Review of Economic Studies, Blackwell Publishing, vol. 67(1), pages 1-16, January.
  15. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March. [Downloadable!] (restricted)
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  17. Gale, Douglas, 1987. "Limit theorems for markets with sequential bargaining," Journal of Economic Theory, Elsevier, vol. 43(1), pages 20-54, October. [Downloadable!] (restricted)
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  19. Charness, Gary, 2000. "Bargaining efficiency and screening: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 42(3), pages 285-304, July. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dean Corbae & John Duffy, 2003. "Experiments with Network Formation," Levine's Working Paper Archive 666156000000000319, David K. Levine. [Downloadable!]
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  2. Pablo Brañas-Garza & Ramón Cobo-Reyes & Natalia Jiménez & Giovanni Ponti, 2005. "An experimental device to elicit social networks," ThE Papers 05/19, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
  3. Falk, Armin & Kosfeld, Michael, 2003. "It's All About Connections: Evidence on Network Formation," CEPR Discussion Papers 3970, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Gary Charness & Antonio Cabrales, 2008. "Optimal Contracts With Team Production And Hidden Information: An Experiment," University of California at Santa Barbara, Economics Working Paper Series 12-08, Department of Economics, UC Santa Barbara. [Downloadable!]
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  5. Antoni Rubí-Barceló, 2008. "Structural holes and densely connected communities," DEA Working Papers 32, Universitat de les Illes Balears, Departament d'Economía Aplicada. [Downloadable!]
  6. Michael Kosfeld, . "Network Experiments," IEW - Working Papers iewwp152, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  7. Shachar Kariv & Douglas Gale, 2007. "Trading in Networks: A Normal Form Game Experiment," Levine's Bibliography 843644000000000114, UCLA Department of Economics. [Downloadable!]
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  8. Falk, Armin & Fischbacher, Urs & Gächter, Simon, 2004. "Living in Two Neighborhoods: Social Interactions in the Lab," IZA Discussion Papers 1381, Institute for the Study of Labor (IZA). [Downloadable!]
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