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The Attraction and Compromise Effects in Bargaining: Experimental Evidence

Author

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  • Fabio Galeotti

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - 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.
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Suggested Citation

  • Fabio Galeotti & Maria Montero & Anders Poulsen, 2018. "The Attraction and Compromise Effects in Bargaining: Experimental Evidence," Post-Print halshs-01820223, HAL.
    • Handle: RePEc:hal:journl:halshs-01820223
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    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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