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On the influence of hard leverage in a soft leverage bargaining game: The importance of credible claims

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  • Bolton, Gary E.
  • Karagözoğlu, Emin

Abstract

What makes a bargaining proposal credible? We study how hard leverage (binding commitment) influences soft leverage (appealing to a focal point) in a rich-context bargaining game known to exhibit competing claims to focality. In three treatments, our experiment varies one bargainer's ability to commit, holding the soft leverage condition fixed. As in previous studies, we observe that opening offers are consistent with the available soft leverage. The influence of hard leverage is most evident in the concessionary stage. Hard and soft leverage interact to influence outcomes: Hard leverage advantages its holder, yet settlements largely stay between the two focal points. We posit that focal points induce mutual expectations of bargainer social preferences that, when combined with the Nash bargaining solution, imply the comparative statics concerning the settlements observed. A similarly modified version of the Zeuthen–Harsanyi model of the bargaining process, agrees with the comparative statics on opening offers and concessions.

Suggested Citation

  • Bolton, Gary E. & Karagözoğlu, Emin, 2016. "On the influence of hard leverage in a soft leverage bargaining game: The importance of credible claims," Games and Economic Behavior, Elsevier, vol. 99(C), pages 164-179.
  • Handle: RePEc:eee:gamebe:v:99:y:2016:i:c:p:164-179
    DOI: 10.1016/j.geb.2016.08.005
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    Cited by:

    1. 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.
    2. repec:eee:jeborg:v:147:y:2018:i:c:p:115-128 is not listed on IDEAS
    3. repec:spr:jogath:v:47:y:2018:i:1:d:10.1007_s00182-017-0588-4 is not listed on IDEAS

    More about this item

    Keywords

    Bargaining; Credibility; Experiments; Hard leverage; Soft leverage;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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