How sensitive are bargaining outcomes to changes in disagreement payoffs?
AbstractWe use a human–subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’disagreement payoffs. Subjects bargain against changing opponents, with an asymmetric disagreement outcome that varies over plays of the game. Both bargaining parties are informed of both disagreement payoffs (and the cake size) prior to bargaining. We find that bargaining outcomes do vary with the disagreement outcome, but subjects severely under–react to changes in their own disagreement payoff and to changes in the opponent’s disagreement payoff, relative to the risk–neutral prediction. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, and for two different cake sizes varying by a factor of four. We show theoretically that standard models of expected utility maximisation are unable to account for this under–responsiveness – even when risk aversion is introduced. We also show that other–regarding preferences can explain our main results.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 36-11.
Length: 37 pages
Date of creation: Dec 2011
Date of revision:
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Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
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Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BEC-2012-01-10 (Business Economics)
- NEP-CBE-2012-01-10 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-01-10 (Evolutionary Economics)
- NEP-EXP-2012-01-10 (Experimental Economics)
- NEP-GTH-2012-01-10 (Game Theory)
- NEP-UPT-2012-01-10 (Utility Models & Prospect Theory)
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- Nejat Anbarci & Nick Feltovich, 2012.
"How responsive are people to changes in their bargaining position? Earned bargaining power and the 50–50 norm,"
2012_6, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
- Nejat Anbarci & Nick Feltovich, 2012. "How responsive are people to changes in their bargaining position? Earned bargaining power and the 50–50 norm," Economics Series 2012_2, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
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