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The Attraction and Compromise Effects in Bargaining: Experimental Evidence

Author

Listed:
  • Fabio Galeotti

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Maria Montero

    (UON - University of Nottingham, UK)

  • Anders Poulsen

    (UEA - University of East Anglia [Norwich])

Abstract

We experimentally investigate, in an unstructured bargaining environment with commonly known money payoffs, the attraction effect and compromise effect (AE and CE) in bargaining, namely, a tendency for bargainers to agree to an intermediate option (CE) or to an option that dominates another option (AE). We conjecture that the relevance of the AE and CE in bargaining is constrained by how focal the feasible agreements' payoffs are. We indeed observe that there are significant AEs and CEs, but these effects are mediated by the efficiency and equality properties of the feasible agreements. Due to the allure of equality, the effects are harder to observe when an equal earnings contract is available. Decoys are more effective in shifting agreements from a very unequal contract to a less unequal one rather than the reverse. This paper was accepted by Yuval Rottenstreich, behavioral economics and decision analysis.

Suggested Citation

  • Fabio Galeotti & Maria Montero & Anders Poulsen, 2022. "The Attraction and Compromise Effects in Bargaining: Experimental Evidence," Post-Print hal-03514435, HAL.
    • Handle: RePEc:hal:journl:hal-03514435
    DOI: 10.1287/mnsc.2021.4025
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    Cited by:

    1. Makoto Hagiwara, 2024. "The focal Luce model with status Quo," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(1), pages 107-117, June.
    2. Andrew M. Colman & Briony D. Pulford & Alexander Crombie, 2024. "Persistence or decay of strategic asymmetric dominance in repeated dyadic games?," Experimental Economics, Springer;Economic Science Association, vol. 27(4), pages 766-786, September.
    3. Yuan, Yichao & Xiao, Tiaojun, 2023. "Revelation mechanism and decoy strategy for a supply chain with consumer's perceived substitutability," Omega, Elsevier, vol. 120(C).
    4. Claus‐Jochen Haake & Thorsten Upmann & Papatya Duman, 2023. "Wage bargaining and employment revisited: separability and efficiency in collective bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(2), pages 403-440, April.

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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