How sensitive are bargaining outcomes to changes in disagreement payoffs?

Anbarci, Nejat and Feltovich, Nick 2013, How sensitive are bargaining outcomes to changes in disagreement payoffs?, Experimental economics, vol. 16, no. 4, pp. 560-596.

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Title How sensitive are bargaining outcomes to changes in disagreement payoffs?
Author(s) Anbarci, Nejat
Feltovich, Nick
Journal name Experimental economics
Volume number 16
Issue number 4
Start page 560
End page 596
Total pages 37
Publisher Springer US
Place of publication New York, NY
Publication date 2013-12
ISSN 1386-4157
Keyword(s) Nash demand game
unstructured bargaining
disagreement
experiment
risk aversion
social preference
other-regarding behaviour
bargaining power
Summary We use a human-subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’ disagreement payoffs. Subjects bargain against changing opponents, with randomly drawn asymmetric disagreement outcomes that vary over plays of the game, and with complete information about disagreement payoffs and the cake size. We find that subjects only respond about half as much as theoretically predicted to changes in their own disagreement payoff and to changes in their opponent’s disagreement payoff. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, in both early and late rounds, and is robust to moderate changes in stake sizes. We show theoretically that standard models of expected utility maximisation are unable to account for this under-responsiveness, even when generalised to allow for risk aversion. We also show that quantal-response equilibrium has, at best, mixed success in characterising our results. However, a simple model of other-regarding preferences can explain our main results.
Language eng
Field of Research 140206 Experimental Economics
Socio Economic Objective 910299 Microeconomics not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2013, Springer
Persistent URL http://hdl.handle.net/10536/DRO/DU:30061753

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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