Reference-point effects in bargaining

This paper investigates whether an earned endowment can serve as a salient reference point in unstructured bargaining and thereby reshape focal agreements. In a laboratory experiment with 166 participants, subjects earn endowments in a real-effort task, and subsequent bargaining menus are framed as changes relative to these earned endowments, while disagreement yields zero payoffs. The design distinguishes agreements that equalize total earnings (equal splits in final payoffs) from agreements that equalize the incremental surplus relative to the reference point (equal changes). Under symmetric endowments these notions coincide; under asymmetric endowments they diverge, so equalizing total earnings requires an unequal division of the incremental surplus. Results show that equal splits are not universal even under symmetry, and when endowments are asymmetric they lose focality in favor of equal-change and intermediate compromise agreements. The findings are robust across environments in which the reference point is available, dominated by some feasible agreements, or an infeasible claim. The results highlight how the salience and asymmetry of a reference point affects which notion of equality is focal in bargaining.