Advanced Search
MyIDEAS: Login

Bargaining with random arbitration: an experimental study

Contents:

Author Info

  • Nejat Anbarci
  • Nick Feltovich

Abstract

We use a laboratory experiment to study bargaining in the presence of random arbitration. Two players make simultaneous demands; if compatible, each receives the amount demanded as in the standard Nash demand game. If bargainers’ demands are incompatible, then rather than bargainers receiving their disagreement payoffs with certainty, they receive them only with exogenous probability 1−q. With probability q, there is random arbitration instead, with one bargainer randomly selected to receive his/her demand and the other bargainer receiving the remainder. The bargaining set is asymmetric, with one bargainer favoured over the other. We set disagreement payoffs to zero, and vary q over several values ranging from zero to one. Our main experimental results support the directional predictions of standard game theory (though the success of its point predictions is mixed). In the spirit of typical results for conventional arbitration, we observe a strong chilling effect on bargaining for values of q near one, with extreme demands and low agreement rates in these treatments. For the most part, increases in q reinforce the built-in asymmetry of the game, further benefiting the favoured player at the expense of the unfavoured player. The effects we find are non-uniform in q: over some fairly large ranges, increases in q have minimal effect on bargaining outcomes, but for other values of q, a small additional increase in q leads to sharp changes in results.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.buseco.monash.edu.au/eco/research/papers/2011/3511bargainingrandomanbarcifeltovich.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 35-11.

as in new window
Length: 27 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:mos:moswps:2011-35

Contact details of provider:
Postal: Department of Economics, Monash University, Victoria 3800, Australia
Phone: +61-3-9905-2493
Fax: +61-3-9905-5476
Email:
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC

Order Information:
Email:
Web: http://www.buseco.monash.edu.au/eco/research/papers/

Related research

Keywords: Nash demand game; random arbitration; chilling effect; equilibrium selection; experiment.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2011-35. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.