Learning in Trade Negotiations: An Experimental Study

Abstract

The purpose of this paper identifies learning in games in the experimental economic settings, and applies their results on real multilateral trade negotiations. This paper argues that structure of games including a veto player (Veto games) are similar to real multilateral trade negotiations in that the players do not possess identical power. This paper’s main contribution involves showing that learning on power is dominant over learning on theory in Veto games. More importantly, this paper shows that players are concerned about how much they have gained in previous games in Veto games, although their memories generally do not last beyond the next game, and thus they tend to be selfish as they have less shares. Based on these results, it sees the possibility to be more generous in distribution of benefits; allowing players without veto power to retain special rights so that they would not be totally powerless, necessity of having ‘respite’ in the process of negotiations, and policy options for choosing partners for winning coalitions.