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From Ultimatum to Nash Bargaining: Theory and Experimental Evidence

Author

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  • 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
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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).
    5. Federica Alberti & Sven Fischer & Werner Güth & Kei Tsutsui, 2018. "Concession Bargaining," Journal of Conflict Resolution, Peace Science Society (International), vol. 62(9), pages 2017-2039, October.
    6. Guth, Werner & Muller, Wieland & Spiegel, Yossi, 2006. "Noisy leadership: An experimental approach," Games and Economic Behavior, Elsevier, vol. 57(1), pages 37-62, October.
    7. 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.
    8. 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.
    9. 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, Universität Innsbruck.
    10. 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.
    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. Luis Alejandro Palacio García & Alexandra Cortés Aguilar & Manuel Muñoz-Herrera, 2015. "The bargaining power of commitment: An experiment of the effects of threats in the sequential hawk–dove game," Rationality and Society, , vol. 27(3), pages 283-308, August.
    13. Alice Guerra & Maria Maraki & Baptiste Massenot & Christian Thöni, 2023. "Deterrence, settlement, and litigation under adversarial versus inquisitorial systems," Public Choice, Springer, vol. 196(3), pages 331-356, September.
    14. Maarten C.W. Janssen, 2006. "On the Strategic Use of Focal Points in Bargaining Situations," Tinbergen Institute Discussion Papers 06-040/1, Tinbergen Institute.
    15. Poulsen, Anders, 2007. "Learning to Make Strategic Moves: Experimental Evidence," MPRA Paper 10927, University Library of Munich, Germany.
    16. 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.
    17. 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.
    18. Luis Alejandro Palacio Garcia & Brayan Snehider D�az, 2022. "Comunicación, jugadas estratégicas y compromiso: un análisis desde la economía experimental," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 41(73), pages 17-42.
    19. 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.
    20. Chiara Felli & Werner Güth & Esther Mata-Pérez & Giovanni Ponti, 2018. "Ultimatum Concession Bargaining," Journal of Conflict Resolution, Peace Science Society (International), vol. 62(5), pages 1012-1043, May.

    More about this item

    Keywords

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    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

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