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Bounded rationality in laboratory bargaining with asymmetric information

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  • Timothy Cason

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  • Stanley Reynolds

Abstract

This paper reports an experiment on two-player sequential bargaining with asymmetric information that features some forces present in multi-round monopoly pricing environments. Buyer-seller pairs play a series of bargaining games that last for either one or two rounds of offers. The treatment variable is the probability of continuing into a second round. Equilibrium predictions do a poor job of explaining levels of prices and treatment effects. As an alternative to the conventional equilibrium model, we consider models that allow for bounded rationality of subjects. The quantal response equilibrium model captures some of the important features of the results. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • Timothy Cason & Stanley Reynolds, 2005. "Bounded rationality in laboratory bargaining with asymmetric information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(3), pages 553-574, April.
  • Handle: RePEc:spr:joecth:v:25:y:2005:i:3:p:553-574 DOI: 10.1007/s00199-003-0464-2
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    References listed on IDEAS

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    Cited by:

    1. Philip A. Haile & Ali Horta├žsu & Grigory Kosenok, 2008. "On the Empirical Content of Quantal Response Equilibrium," American Economic Review, American Economic Association, pages 180-200.
    2. Philip A. Haile & Ali Horta├žsu & Grigory Kosenok, 2008. "On the Empirical Content of Quantal Response Equilibrium," American Economic Review, American Economic Association, pages 180-200.
    3. Jan Potters & Martin Sefton & Lise Vesterlund, 2007. "Leading-by-example and signaling in voluntary contribution games: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 169-182, October.
    4. Rosato, Antonio, 2017. "Sequential negotiations with loss-averse buyers," European Economic Review, Elsevier, vol. 91(C), pages 290-304.
    5. Bryan C. McCannon & John B. Stevens, 2015. "Role of Personality Style on Bargaining Outcomes," Working Papers 15-22, Department of Economics, West Virginia University.
    6. Sean Crockett, 2008. "Learning competitive equilibrium in laboratory exchange economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 157-180, January.

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