Bargaining or Searching for a Better Price? - An Experimental Study
AbstractThis experimental study investigates two bargaining games with twosided incomplete information between a seller and a buyer. In the first game with no outside options many subjects do not use the incomplete information to their advantage as predicted. We find that a model with adjusting priors better explains observed behavior. The second game gives the buyer the option to buy via search or return to bargaining. Here many buyers choose a bargaining agreement when a search outcome is predicted. For those who opt out, search outcomes are overall efficient and behavior is relatively close to the optimal search policy.
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Bibliographic InfoPaper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2010-27.
Date of creation: Oct 2010
Date of revision:
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More information through EDIRC
Bargaining Experiment; Outside Option; Search;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-CTA-2010-10-16 (Contract Theory & Applications)
- NEP-EXP-2010-10-16 (Experimental Economics)
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