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Effect of reduced opportunities on bargaining outcomes: an experiment with status asymmetries

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  • Subrato Banerjee

    (Queensland University of Technology Business School (Centre for Behavioural Economics, Society and Technology)
    University of Melbourne (Australia India Institute))

Abstract

Several allocation rules (such as the Kalai–Smorodinsky solution) allow for possible violations of the ‘independence of irrelevant alternatives’ (IIA) axiom in cooperative bargaining game theory. Nonetheless, there is no conclusive evidence on how contractions of feasible sets exactly affect bargaining outcomes. We have been able to identify a definite behavioral channel through which such contractions actually determine the outcomes of negotiated bargaining. We find that the direction and the extent of changes in bargaining outcomes, due to contraction of the feasible set, respond to the level of (given) agent asymmetry with a remarkable degree of regularity. Alongside, we conclude that the validity of the IIA axiom is only limited to symmetric games.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:theord:v:89:y:2020:i:3:d:10.1007_s11238-020-09754-4
    DOI: 10.1007/s11238-020-09754-4
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    Cited by:

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    2. William Thomson, 2022. "On the axiomatic theory of bargaining: a survey of recent results," Review of Economic Design, Springer;Society for Economic Design, vol. 26(4), pages 491-542, December.

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    More about this item

    Keywords

    Experimental bargaining; Agent asymmetry; Contraction axiom;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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