IDEAS home Printed from https://ideas.repec.org/p/esi/discus/2003-07.html
   My bibliography  Save this paper

From Ultimatum to Nash Bargaining: Theory and Experimental Evidence

Author

Listed:
  • Sven Fischer
  • Werner Güth
  • Wieland Müller

Abstract

We examine the strategic behavior of first and second movers in a two party bargaining game with uncertain information transmission. When the first mover states her demand she does only know the probability with which the second mover will be informed about it. If the second mover is informed, she can either accept or reject the offer and payoffs are determined as in the ultimatum game. If she is not informed, the second mover states her own demand and payoffs are determined as in the Nash demand game. In the experiment we vary the commonly known probability of information transmission. Our main finding is that first movers' and uninformed second movers' demands adjust to this probability as qualitatively predicted, that is, first movers' (uninformed second movers') demands are lower (higher) the lower the probability of a signal.

Suggested Citation

  • Sven Fischer & Werner Güth & Wieland Müller, "undated". "From Ultimatum to Nash Bargaining: Theory and Experimental Evidence," Papers on Strategic Interaction 2003-07, Max Planck Institute of Economics, Strategic Interaction Group.
  • Handle: RePEc:esi:discus:2003-07
    as

    Download full text from publisher

    File URL: ftp://papers.econ.mpg.de/esi/discussionpapers/2003-07.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, February.
    2. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
    3. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-248, March.
    4. Fershtman, Chaim & Judd, Kenneth L & Kalai, Ehud, 1991. "Observable Contracts: Strategic Delegation and Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 551-559, August.
    5. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August.
    6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    7. Huck, Steffen & Muller, Wieland, 2000. "Perfect versus Imperfect Observability--An Experimental Test of Bagwell's Result," Games and Economic Behavior, Elsevier, vol. 31(2), pages 174-190, May.
    8. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    9. Guth, Werner, 1995. "On ultimatum bargaining experiments -- A personal review," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 329-344, August.
    10. Cabrales, Antonio & Garcia-Fontes, Walter & Motta, Massimo, 2000. "Risk dominance selects the leader: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 137-162, January.
    11. Straub, Paul G., 1995. "Risk dominance and coordination failures in static games," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 339-363.
    12. Rubinstein, Ariel, 1989. "The Electronic Mail Game: Strategic Behavior under "Almost Common Knowledge."," American Economic Review, American Economic Association, vol. 79(3), pages 385-391, June.
    13. van Damme, Eric & Hurkens, Sjaak, 1997. "Games with Imperfectly Observable Commitment," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 282-308, October.
    14. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    15. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, February.
    16. Morgan, John & Vardy, Felix, 2004. "An experimental study of commitment in Stackelberg games with observation costs," Games and Economic Behavior, Elsevier, vol. 49(2), pages 401-423, November.
    17. John B. Van Huyck & Raymond C. Battalio & Richard O. Beil, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 885-910.
    18. Amnon Rapoport, 1997. "Order of Play in Strategically Equivalent Games in Extensive Form," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(1), pages 113-136.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anders Poulsen & Michael Roos, 2010. "Do people make strategic commitments? Experimental evidence on strategic information avoidance," Experimental Economics, Springer;Economic Science Association, vol. 13(2), pages 206-225, June.
    2. Anders Poulsen & Jonathan Tan, 2007. "Information acquisition in the ultimatum game: An experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(4), pages 391-409, December.
    3. Werner Güth & Charlotte Klempt & Kerstin Pull, 2019. "Cognitively differentiating between sharing games: inferences from choice and belief data of proposer participants," Economics Bulletin, AccessEcon, vol. 39(1), pages 605-614.
    4. Avrahami, Judith & Güth, Werner & Hertwig, Ralph & Kareev, Yaakov & Otsubo, Hironori, 2013. "Learning (not) to yield: An experimental study of evolving ultimatum game behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 47-54.
    5. Sven Fischer & Werner Güth & Kerstin Pull, 2007. "Evolution In Imperfect Commitment Bargaining—Strategic Versus Ignorant Types," Metroeconomica, Wiley Blackwell, vol. 58(2), pages 299-309, May.
    6. Uschi Backes-Gellner & Donata Bessey & Kerstin Pull & Simone Tuor, 2008. "What Behavioural Economics Teaches Personnel Economics," Working Papers 0077, University of Zurich, Institute for Strategy and Business Economics (ISU).
    7. Poulsen, Anders, 2007. "Learning to Make Strategic Moves: Experimental Evidence," MPRA Paper 10927, University Library of Munich, Germany.
    8. Guth, Werner & Muller, Wieland & Spiegel, Yossi, 2006. "Noisy leadership: An experimental approach," Games and Economic Behavior, Elsevier, vol. 57(1), pages 37-62, October.
    9. Güth, Werner & Kocher, Martin G., 2014. "More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 396-409.
    10. Feltovich, Nick & Swierzbinski, Joe, 2011. "The role of strategic uncertainty in games: An experimental study of cheap talk and contracts in the Nash demand game," European Economic Review, Elsevier, vol. 55(4), pages 554-574, May.
    11. Syngjoo Choi & Andrea Galeotti & Sanjeev Goyal, 2017. "Trading in Networks: Theory and Experiments," Journal of the European Economic Association, European Economic Association, vol. 15(4), pages 784-817.
    12. Tanja Hörtnagl & Rudolf Kerschbamer, 2014. "How the Value of Information Shapes the Value of Commitment Or: Why the Value of Commitment Does Not Vanish," Working Papers 2014-03, Faculty of Economics and Statistics, University of Innsbruck.
    13. Poulsen, Anders U. & Tan, Jonathan H.W., 2004. "Can Information Backfire? - Experimental Evidence from the Ultimatum Game," Working Papers 04-16, University of Aarhus, Aarhus School of Business, Department of Economics.
    14. Anders U. Poulsen & Michael V. M. Roos, 2009. "Do People Make Strategic Moves? Experimental Evidence on Strategic Information Avoidance," Discussion Papers 09-06, University of Copenhagen. Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guth, Werner & Muller, Wieland & Spiegel, Yossi, 2006. "Noisy leadership: An experimental approach," Games and Economic Behavior, Elsevier, vol. 57(1), pages 37-62, October.
    2. Mielke, Jahel & Steudle, Gesine A., 2018. "Green Investment and Coordination Failure: An Investors' Perspective," Ecological Economics, Elsevier, vol. 150(C), pages 88-95.
    3. Goeree, Jacob K. & Holt, Charles A., 2005. "An experimental study of costly coordination," Games and Economic Behavior, Elsevier, vol. 51(2), pages 349-364, May.
    4. Konstantinos Georgalos & Indrajit Ray & Sonali SenGupta, 2020. "Nash versus coarse correlation," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1178-1204, December.
    5. Cabrales, Antonio & Garcia-Fontes, Walter & Motta, Massimo, 2000. "Risk dominance selects the leader: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 137-162, January.
    6. Rui SILVA, 2018. "Equilibrium Selection in n-Person Static Games with Complete Information," Departmental Working Papers 2018-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    7. Georgalos, Konstantinos & Ray, Indrajit & Gupta, Sonali Sen, 2019. "Nash vs. Coarse Correlation," Cardiff Economics Working Papers E2019/3, Cardiff University, Cardiff Business School, Economics Section.
    8. Anke Gerbery & Thorsten Hensz & Bodo Vogtx, 2010. "Rational Investor Sentimentina Repeated Stochastic Game with Imperfect Monitoring," Post-Print hal-00911824, HAL.
    9. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 2001. "Minimum-Effort Coordination Games: Stochastic Potential and Logit Equilibrium," Games and Economic Behavior, Elsevier, vol. 34(2), pages 177-199, February.
    10. Battalio,R. & Samuelson,L. & Huyck,J. van, 1998. "Risk dominance, payoff dominance and probabilistic choice learning," Working papers 2, Wisconsin Madison - Social Systems.
    11. Matthias Blonski & Giancarlo Spagnolo, 2015. "Prisoners’ other Dilemma," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(1), pages 61-81, February.
    12. Vincent Buskens & Chris Snijders, 2016. "Effects of Network Characteristics on Reaching the Payoff-Dominant Equilibrium in Coordination Games: A Simulation study," Dynamic Games and Applications, Springer, vol. 6(4), pages 477-494, December.
    13. Gerber, Anke & Hens, Thorsten & Vogt, Bodo, 2010. "Rational investor sentiment in a repeated stochastic game with imperfect monitoring," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 669-704, December.
    14. Jackson, Matthew O. & Rodriguez-Barraquer, Tomas & Tan, Xu, 2012. "Epsilon-equilibria of perturbed games," Games and Economic Behavior, Elsevier, vol. 75(1), pages 198-216.
    15. Susanne Büchner & Werner Güth & Luis M. Miller, 2005. "Conventions for Selecting Among Conventions - An Evolutionary and Experimental Analysis," Papers on Strategic Interaction 2005-21, Max Planck Institute of Economics, Strategic Interaction Group.
    16. Sandra Polania-Reyes, 2016. "Disentangling Social Capital: Lab-in-the-Field Evidence on Coordination, Networks, and Cooperation," Artefactual Field Experiments 00565, The Field Experiments Website.
    17. Johne Bone & Michalis Drouvelis & Indrajit Ray, 2013. "Coordination in 2 x 2 Games by Following Recommendations from Correlated Equilibria," Discussion Papers 12-04r, Department of Economics, University of Birmingham.
    18. Pilwon Kim & Dongryul Lee, 2019. "Repeated minimum-effort coordination games," Journal of Evolutionary Economics, Springer, vol. 29(4), pages 1343-1359, September.
    19. Maarten C.W. Janssen, 1997. "Focal Points," Tinbergen Institute Discussion Papers 97-091/1, Tinbergen Institute.
    20. Ennis, Huberto M. & Keister, Todd, 2005. "Government policy and the probability of coordination failures," European Economic Review, Elsevier, vol. 49(4), pages 939-973, May.

    More about this item

    Keywords

    commitment; imperfect observability; ultimatum bargaining game; Nash bargaining game; experiments;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esi:discus:2003-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karin Richter) The email address of this maintainer does not seem to be valid anymore. Please ask Karin Richter to update the entry or send us the correct email address. General contact details of provider: https://edirc.repec.org/data/mpiewde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.