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Equal Splits or Product Prices: An Experiment

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Abstract

This paper compares the choice of focal points in a Nash Demand Game embedded in an abstract frame with the corresponding choices in a game with a real product frame where parties bargain for a well-known consumer product. We find that the frame has a substantial impact on the fraction of subjects choosing the equal split outcome casting doubt on the robustness of this solution in bargaining over real goods. The paper shows that there is notable heterogeneity among subjects with regard to their choices of focal points and reports individual characteristics predicting these choices.

Suggested Citation

  • Holm, Håkan J. & Svensson, Emma, 2011. "Equal Splits or Product Prices: An Experiment," Working Papers 2011:16, Lund University, Department of Economics, revised 22 Apr 2013.
  • Handle: RePEc:hhs:lunewp:2011_016
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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP11_16.pdf
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    1. Mariana Blanco & Dirk Engelmann & Alexander Koch & Hans-Theo Normann, 2010. "Belief elicitation in experiments: is there a hedging problem?," Experimental Economics, Springer;Economic Science Association, vol. 13(4), pages 412-438, December.
    2. Bergman, Oscar & Ellingsen, Tore & Johannesson, Magnus & Svensson, Cicek, 2010. "Anchoring and cognitive ability," Economics Letters, Elsevier, vol. 107(1), pages 66-68, April.
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    Keywords

    focal points; Nash Demand Game; heterogeneity; framing; equilibrium selection;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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