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Is earned bargaining power more fully exploited?

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  • Feltovich, Nick

Abstract

In past experiments involving a wide range of bargaining settings, individuals exploited their bargaining position less fully than standard theory predicts. Typically, these experiments allocated bargaining position randomly, so that bargainers, viewing their position as unearned, may have been reluctant to fully exploit it. We investigate the impact of earned bargaining power using theory and experiment. In our “Earned” treatment, disagreement payoffs – and hence bargaining power – are based on performance on a real–effort task. In our “Assigned” treatment, subjects perform the task but disagreement payoffs are randomly assigned. Our “Notask” treatment is like the Assigned treatment but without the task. Comparison of our Earned and Assigned treatments provides our main result: subjects are more responsive to changes in bargaining position when it is earned. Responsiveness is also often higher in our Assigned treatment than in our Notask treatment – suggesting a possible effect of merely including a status–irrelevant task – though these differences are usually insignificant.

Suggested Citation

  • Feltovich, Nick, 2019. "Is earned bargaining power more fully exploited?," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 152-180.
  • Handle: RePEc:eee:jeborg:v:167:y:2019:i:c:p:152-180
    DOI: 10.1016/j.jebo.2019.09.021
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    1. Emin Karagözoğlu & Kerim Keskin & Elif Özcan-Tok, 2019. "Between anchors and aspirations: a new family of bargaining solutions," Review of Economic Design, Springer;Society for Economic Design, vol. 23(1), pages 53-73, June.
    2. Subrato Banerjee, 2020. "Effect of reduced opportunities on bargaining outcomes: an experiment with status asymmetries," Theory and Decision, Springer, vol. 89(3), pages 313-346, October.

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    More about this item

    Keywords

    Nash demand game; Unstructured bargaining; Real effort; Equal split; Experiment;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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