What Price Compromise? Testing a Possibly Surprising Implication of Nash Bargaining Theory
This paper identifies, and tests experimentally, a prediction of Nash Bargaining Theory that may appear counterintuitive. The context is a simple bargaining problem in which two players have to agree a choice from three alternatives. One alternative favours one player and a second favours the other. The third is an apparently reasonable compromise, but is in fact precluded as an agreed choice by the axioms of Nash Bargaining Theory. Experimental results show that agreement on this third alternative occurs rather often. So the axiomatic Nash theory is not well-supported by our evidence. Our subjects' behaviour could be interpreted as the paying of an irrationally (according to the Nash theory) high price in order to reach a compromise agreement.
|Date of creation:||Aug 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Web page: http://www.york.ac.uk/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cox, J. & Friedman, D. & Gjerstad, S., 2006.
"A Trackable Model of Reciprocity and Fairness,"
Purdue University Economics Working Papers
1181, Purdue University, Department of Economics.
- James Cox & Daniel Friedman & Steven Gjerstad, 2004. "A Tractable Model of Reciprocity and Fairness," Experimental 0406001, EconWPA.
- James C. Cox & Daniel Friedman & Steven Gjerstad, 2006. "A Tractable Model of Reciprocity and Fairness," Experimental Economics Center Working Paper Series 2006-05, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
- Roth, Alvin E & Murnighan, J Keith, 1982.
"The Role of Information in Bargaining: An Experimental Study,"
Econometric Society, vol. 50(5), pages 1123-42, September.
- Alvin E Roth & J K Murnighan, 1997. "The rule of information in bargaining: an experimental study," Levine's Working Paper Archive 1631, David K. Levine.
- Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
When requesting a correction, please mention this item's handle: RePEc:yor:yorken:06/18. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson)
If references are entirely missing, you can add them using this form.