A bargaining experiment with asymmetric institutions and preferences

We report results from a laboratory experiment on strategic bargaining with indivisibilities studying the role of asymmetries, both in preferences and institutions. We find that subjects do not fully grasp the equilibrium effects asymmetries have on bargaining power and identify how subjects' o...

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Bibliographic Details
Published in:Social choice and welfare 2019-02, Vol.52 (2), p.329-351
Main Authors: Kamm, Aaron, Houba, Harold
Format: Article
Language:English
Subjects:
Acknowledgment
Asymmetry
Bargaining
Economic models
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Equilibrium
Game Theory
Institutions
International Political Economy
Original Paper
Power
Public Finance
Risk
Risk behavior
Social and Behav. Sciences
Social Policy
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Summary:We report results from a laboratory experiment on strategic bargaining with indivisibilities studying the role of asymmetries, both in preferences and institutions. We find that subjects do not fully grasp the equilibrium effects asymmetries have on bargaining power and identify how subjects' observed behavior systematically deviates from theoretical predictions. The deviations are especially pronounced in case of asymmetric institutions which are modelled as probabilities of being the proposer. Additionally, in contrast to previous experimental work, we observe larger than predicted proposer power since subjects frequently propose and accept their second-preferred option. Quantal response equilibrium and risk aversion explain behavior whenever probabilities are symmetric, but less so when asymmetric. We propose the 'recognition is power' heuristic which equates bargaining power with recognition probabilities to explain these findings.
ISSN:0176-1714
1432-217X
DOI:10.1007/s00355-018-1150-4