Bargaining in the shadow of a commitment problem

Abstract

This paper reports results from laboratory experiments on how commitment problems affect bargaining choices. Subjects are randomly assigned the conditions that produce a commitment problem in order to estimate the effect the commitment problem condition has on bargaining behavior. The empirical results suggest subjects are consistently responsive to the commitment problem condition. When presented with a commitment problem, most subjects identify the condition and choose the present day lottery over future negotiation. Moreover, subjects not exposed to the commitment problem condition bargain as if they were playing the one-stage ultimatum game. Subjects in both games are responsive to their own costs rather than their opponents, playing as if this complete information game were in an incomplete information setting.