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A General Experiment on Bargaining in Demand Games with Outside Options

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  • Kahn, Lawrence M
  • Munighan, J Keith

Abstract

This experiment factorially combined the major independent variables from previous demand-game experiments (discount factors, outside options, termination probability, and first mover). Game-theoretic predictions were largely refuted by the data and outcomes were often inefficient. Players without an outside option demanded more than predicted and those with an option appeared to anticipate this behavior. Nonetheless, there was a positive relationship between differences in equilibrium predictions and differences in behavior. Bargainers appeared to focus on a minimally acceptable offer in making their demands and in considering the likelihood that the other party would accept their offer. Copyright 1993 by American Economic Association.

Suggested Citation

  • Kahn, Lawrence M & Munighan, J Keith, 1993. "A General Experiment on Bargaining in Demand Games with Outside Options," American Economic Review, American Economic Association, vol. 83(5), pages 1260-1280, December.
    • Handle: RePEc:aea:aecrev:v:83:y:1993:i:5:p:1260-80
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    Cited by:

    1. Zsombor Z. M'eder & Carsten K. W. de Dreu & Jorg Gross, 2022. "Equilibria of Attacker-Defender Games," Papers 2202.10072, arXiv.org, revised May 2023.
    2. Leng, Ailin, 2023. "A Rubinstein bargaining experiment in continuous time," Games and Economic Behavior, Elsevier, vol. 140(C), pages 115-131.
    3. Hessel Oosterbeek & Randolph Sloof & Joep Sonnemans, 2007. "Who should invest in specific training?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(2), pages 329-357, April.
    4. Randolph Sloof, 2003. "Price-setting Power versus Private Information," Tinbergen Institute Discussion Papers 03-099/1, Tinbergen Institute.
    5. Olivier Armantier, 2006. "Do Wealth Differences Affect Fairness Considerations?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 391-429, May.
    6. Deck, Cary A. & Thomas, Charles J., 2020. "Using experiments to compare the predictive power of models of multilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    7. Croson, Rachel & Boles, Terry & Murnighan, J. Keith, 2003. "Cheap talk in bargaining experiments: lying and threats in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 143-159, June.
    8. Matthew Embrey & Guillaume R Fréchette & Sevgi Yuksel, 2018. "Cooperation in the Finitely Repeated Prisoner’s Dilemma," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 509-551.
    9. Nejat Anbarci & Nick Feltovich, 2016. "How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm," Monash Economics Working Papers 21-16, Monash University, Department of Economics.
    10. Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
    11. Olivier Armantier, 2001. "Does Wealth Affect Fairness Considerations?," Department of Economics Working Papers 01-05, Stony Brook University, Department of Economics.
    12. Straub, Paul G. & Murnighan, J. Keith, 1995. "An experimental investigation of ultimatum games: information, fairness, expectations, and lowest acceptable offers," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 345-364, August.
    13. Sebastian Schweighofer-Kodritsch, 2015. "Time Preferences and Bargaining," STICERD - Theoretical Economics Paper Series /2015/568, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    14. Nejat Anbarci & Nick Feltovich, 2013. "How responsive are people to changes in their bargaining position? Earned bargaining power and the 50–50 norm," EcoMod2013 5855, EcoMod.
    15. Burns, Nathaniel A. & Deck, Cary A. & Thomas, Charles J., 2023. "Experimental analysis of impatience in bilateral and multilateral negotiations," Journal of Economic Psychology, Elsevier, vol. 95(C).
    16. Paul Pecorino & Mark Van Boening, 2010. "Fairness in an Embedded Ultimatum Game," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 263-287, May.
    17. Feltovich, Nick, 2019. "Is earned bargaining power more fully exploited?," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 152-180.
    18. Murnighan, J. Keith & Saxon, Michael Scott, 1998. "Ultimatum bargaining by children and adults," Journal of Economic Psychology, Elsevier, vol. 19(4), pages 415-445, August.
    19. Anbarci, Nejat & Feltovich, Nick, 2018. "How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 320-334.
    20. William P. Bottom & Kevin Gibson & Steven E. Daniels & J. Keith Murnighan, 2002. "When Talk Is Not Cheap: Substantive Penance and Expressions of Intent in Rebuilding Cooperation," Organization Science, INFORMS, vol. 13(5), pages 497-513, October.
    21. Carpenter, Jeffrey & Rudisill, McAndrew, 2003. "Fairness, escalation, deference, and spite: strategies used in labor-management bargaining experiments with outside options," Labour Economics, Elsevier, vol. 10(4), pages 427-442, August.
    22. Randolph Sloof, 2005. "Opting Out: An Experimental Comparison of Bazaars versus High-Tech Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 589-620, December.

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