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Coalition formation in multilateral negotiations with a potential for logrolling: An experimental analysis of negotiators' cognition processes

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  • Lehmann-Waffenschmidt, Marco
  • Reina, Livia
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    Abstract

    In the present study we analyse the topic of coalition formation in multi-issue multilateral negotiations under different voting rules when there is the opportunity of logrolling. We have carried out 3 experiments and compare our findings with the standard public choice theory predictions. In the first experiment we have shown that in a situation of 3-issues and 3-parties negotiations with majority rule, most of the subjects behave in a satisficing, not in a optimizing, way. They are found to be subject to a "Zone of Agreement Bias" (ZAB) which induces them to form suboptimal coalitions and to choose Pareto-dominated agreements. Moreover, we find that the cycling problem predicted by public choice theory in most cases does not arise. In experiment 2 we have shown that the adoption of the unanimity, instead of the majority, rule reduced the suboptimizing effect of the ZAB, and produced a much higher rate of optimal agreements. Experiment 3 shows that the results obtained in experiments 1 and 2 hold even when the level of complexity of the negotiation problem increases. To this aim we considered a situation of four-issues and four-parties negotiations under both the majority and the unanimity rule. --

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    Bibliographic Info

    Paper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 17/03.

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    Date of creation: 2003
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    Handle: RePEc:zbw:tuddps:1703

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    1. Selten, Reinhard, . "Features of Experimentally Observed Bounded Rationality," Discussion Paper Serie B 421, University of Bonn, Germany, revised Nov 1997.
    2. Teck-Hua Ho & Keith Weigelt, 1996. "Task Complexity, Equilibrium Selection, and Learning: An Experimental Study," Management Science, INFORMS, INFORMS, vol. 42(5), pages 659-679, May.
    3. Stratmann, Thomas, 1995. "Logrolling in the U.S. Congress," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(3), pages 441-56, July.
    4. Kau, James B & Rubin, Paul H, 1979. "Self-Interest, Ideology, and Logrolling in Congressional Voting," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 22(2), pages 365-84, October.
    5. Reina, Livia, 2003. "Negotiators' cognition: An experimental study on bilateral, integrative negotiation," Dresden Discussion Paper Series in Economics 05/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
    6. Wilson, Robert, 1969. "An Axiomatic Model of Logrolling," American Economic Review, American Economic Association, American Economic Association, vol. 59(3), pages 331-41, June.
    7. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
    8. Stratmann, Thomas, 1992. "The Effects of Logrolling on Congressional Voting," American Economic Review, American Economic Association, American Economic Association, vol. 82(5), pages 1162-76, December.
    9. Peter Bernholz, 1973. "Logrolling, arrow paradox and cyclical majorities," Public Choice, Springer, Springer, vol. 15(1), pages 87-95, June.
    10. Schotter Andrew & Weigelt Keith & Wilson Charles, 1994. "A Laboratory Investigation of Multiperson Rationality and Presentation Effects," Games and Economic Behavior, Elsevier, Elsevier, vol. 6(3), pages 445-468, May.
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