Efficiency in Bargaining Games with Alternating Offers
Bargaining games model situations in which the realization of potential benefits is jeopardized by conflicting bargaining powers. Most of the literature on bargaining behavior focuses on bargaining over gains. Exploration of behavior in situations under which agents bargain over losses has received only limited attention from the profession. An important question is whether the negative effect of competing bargaining powers on the efficiency of agreements is more severe in bargaining over gains or over losses. Another understudied research question is how the likelihood that the outcome of a negotiation will actually be implemented affects efficiency of bargaining. We design an experiment that addresses these two questions. We find that in alternating offers games, outcomes of bargaining over gains are more efficient than outcomes of bargaining over losses. We also find that the likelihood that an interaction is implemented has a positive effect on the efficiency of bargaining.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
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- Jayson L. Lusk & M. Darren Hudson, 2010. "Bargaining Over Losses," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 83-91.
- Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
- Ken Binmore, 2007. "Does Game Theory Work? The Bargaining Challenge," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026074, June.
- James Andreoni & Emily Blanchard, 2006.
"Testing subgame perfection apart from fairness in ultimatum games,"
Springer, vol. 9(4), pages 307-321, December.
- Andreoni,J. & Blanchard,E., 2002. "Testing subgame perfection apart from fairness in ultimatum games," Working papers 15, Wisconsin Madison - Social Systems.
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