The Hot Versus Cold Effect in a Simple Bargaining Experiment

Abstract

In this paper, the strategy method's impact on behavior in sequential bargaining games is investigated. Besides the decision procedure (hot versus cold), we varied the second mover punishment costs (high versus low). Significant impacts of both treatment variables were observed. For example, second movers punished significantly more often in the hot version of the low cost game. Furthermore, first mover behavior was significantly different in the hot and cold versions of both games. In the hot games, first mover behavior suggests an expectation of decreased rewards and/or punishments from second movers. We observed, however, no decrease in reward and an increase in punishment. The hot cold variable only informs first movers that the decision procedure used by second movers has changed. Therefore, first mover behavior must be shaped by their perceived assessment concerning how second movers make decisions. We argue that first mover behavior can be explained by the interaction of two well-known psychological effects: the consensus and positive self-image effects.