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What price compromise?

In: Experiments in Economics Decision Making and Markets

Author

Listed:
  • John Bone
  • John D. Hey
  • John Suckling

Abstract

This paper identifies, and tests experimentally, a prediction of the Nash bargaining axioms that may appear counterintuitive. The context is a simple bargaining problem in which two players have to agree a choice from three alternatives. One alternative favours one player and a second favours the other. The third is an apparently reasonable compromise, but is in fact precluded as an agreed choice by the Nash axioms. Experimental results show that agreement on this third alternative occurs rather often. Our subjects’ behaviour could be interpreted as the paying of an irrationally high price, according to the Nash axioms, in order to reach a compromise agreement.

Suggested Citation

  • John Bone & John D. Hey & John Suckling, 2018. "What price compromise?," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 19, pages 409-426, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813235816_0019
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    Cited by:

    1. is not listed on IDEAS
    2. Fabio Galeotti & Maria Montero & Anders Poulsen, 2015. "Efficiency versus equality in real-time bargaining with communication," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-18, School of Economics, University of East Anglia, Norwich, UK..
    3. Fabio Galeotti & Maria Montero & Anders Poulsen, 2019. "Efficiency Versus Equality in Bargaining," Journal of the European Economic Association, European Economic Association, vol. 17(6), pages 1941-1970.

    More about this item

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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