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Efficiency versus equality in real-time bargaining with communication

Author

Listed:
  • Fabio Galeotti

    (University of Lyon)

  • Maria Montero

    (University of Nottingham)

  • Anders Poulsen

    (University of East Anglia)

Abstract

We collect experimental data from unstructured bargaining situations where bargainers are free to communicate via written messages. We vary the set of feasible contracts, thereby allowing us to assess the focality of three properties of bargaining outcomes: equality, Pareto efficiency, and total earnings maximization. Our main findings are that subjects avoid an equal earnings contract if it is Pareto inefficient; a large proportion of bargaining pairs avoid equal and Pareto efficient contracts in favor of unequal and total earnings maximizing contracts, and this proportion increases when unequal contracts offer larger earnings to one of the players, even though this implies higher inequality. Finally, observed behavior violates the Independence of Irrelevant Alternatives axiom, a result we attribute to a 'compromise effect'.

Suggested Citation

  • Fabio Galeotti & Maria Montero & Anders Poulsen, 2015. "Efficiency versus equality in real-time bargaining with communication," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-18, School of Economics, University of East Anglia, Norwich, UK..
  • Handle: RePEc:uea:wcbess:15-18
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    File URL: https://www.uea.ac.uk/documents/166500/0/CBESS+15-18.pdf/68dc85b5-e664-4eb1-bd94-a25ed56b085e
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bett, Zoë & Poulsen, Anders & Poulsen, Odile, 2016. "The focality of dominated compromises in tacit coordination situations: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 29-34.
    2. Salvatore Nunnari & Jan Zapal, 2017. "A Model of Focusing in Political Choice," Working Papers 599, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

    More about this item

    Keywords

    bargaining; efficiency; equality; communication; experiment; independence of irrelevant alternatives;

    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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