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Bargaining and network structure: An experiment

  • Charness, Gary
  • Corominas-Bosch, Margarida
  • Frechette, Guillaume R.

Abstract: We consider bargaining in a bipartite network of buyers and sellers, who can only trade with the limited number of people with whom they are connected. Such networks could arise due to proximity issues or restricted communication flows, as with information transmission of job openings, business opportunities, and transactions not easily regulated by external authorities. We perform an experimental test of a graph-theoretic model that allows us to decompose any two-sided network into simple networks of three types, with unique predictions about equilibrium prices for the networks in our sessions. We begin with two separate simple networks, which are then joined by an additional link. Participants appear to quickly grasp important characteristics of the networks. The results diverge sharply depending on how this connection is made, typically conforming to the theoretical directional predictions. Payoffs can be systematically affected even for agents who are not connected by the new link. We find evidence of a form of social learning the shares (publicly) allocated to others in the past affect what one is willing to accept.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 136 (2007)
Issue (Month): 1 (September)
Pages: 28-65

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Handle: RePEc:eee:jetheo:v:136:y:2007:i:1:p:28-65
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622869

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  1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
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  4. Fudenberg, Drew & Ellison, Glenn, 1995. "Word-of-Mouth Communication and Social Learning," Scholarly Articles 3196300, Harvard University Department of Economics.
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  14. Keser, Claudia & Ehrhart, Karl-Martin & Berninghaus, Siegfried K., 1998. "Coordination and local interaction: experimental evidence," Economics Letters, Elsevier, vol. 58(3), pages 269-275, March.
  15. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
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  17. Douglas Gale, 2010. "Limit theorems for markets with sequential bargaining," Levine's Working Paper Archive 621, David K. Levine.
  18. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, vol. 115(1), pages 35-77, March.
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