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From Ultimatum to Nash Bargaining: Theory and Experimental Evidence

  • Sven Fischer
  • Werner Güth
  • Wieland Müller

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.

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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2003-07.

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Length: 32 pages
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Handle: RePEc:esi:discus:2003-07
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  14. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 885-910, August.
  15. 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.
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