Bargaining Experiments Research Articles

Seeing what you want: How goal‐oriented descriptions of the status quo alter outcomes in ethno‐territorial conflict bargaining experiments

AbstractIn conflict bargaining models, variation in initial conditions is expected to have a significant impact. Better initial conditions should make the status quo more acceptable and likely to persist, and worse initial conditions should make crisis and conflict more likely. At the same time, players' preferences over the different possible bargaining outcomes are expected to influence perceptions of initial conditions. We use conflict bargaining experiments in ethno‐territorial conflict settings—in which participants are asked to advise leaders—to investigate these relationships. First, we find that variation in leaders' nationalist preferences indeed affects perception of initial conditions. Next, preference‐influenced, goal‐oriented descriptions reduce the effect of variation in initial conditions by making factually better initial conditions seem more similar to factually worse ones. As a result, the conflict‐reducing effects of better initial conditions are weakened. In addition, and perhaps counter‐intuitively, those advising moderate nationalists react more confrontationally to goal‐oriented descriptions of initial conditions than those advising extreme nationalists. The main policy implication is that, as a general rule, more factual, less goal‐oriented description of initial conditions is likely to improve conflict outcomes.

Concord and contention in a dynamic unstructured bargaining experiment with costly conflict

Concord and contention in a dynamic unstructured bargaining experiment with costly conflict

Decision Times Reveal Private Information in Strategic Settings: Evidence from Bargaining Experiments

Abstract People respond quickly when they have a clear preference and slowly when they are close to indifference. The question is whether others exploit this tendency to infer private information. In two-stage bargaining experiments, we observe that the speed with which buyers reject sellers’ offers decreases with the size of the foregone surplus. This should allow sellers to infer buyers’ values from response times, creating an incentive for buyers to manipulate their response times. We experimentally identify distinct conditions under which subjects do, and do not, exhibit such strategic behaviour. These results provide the first insight into the possible use of response time as a strategic variable.

A Rubinstein bargaining experiment in continuous time

I conduct a bargaining experiment with discounting in continuous time. At any point in time, each of the two players can make a proposal. However, after making an offer, a player must wait for a specific duration of “waiting time” before she can make a new offer or accept the other's offer. In addition, the player's share is discounted by her discount rate for every unit of time. In the equilibrium, the agreement is reached immediately, and a player's share increases with her waiting time and decreases with her discount rate. Results show that a longer waiting time or a lower discount rate alone increases a player's proportion of the actual payoff, but the combination of the two factors has a weaker effect.

A bargaining experiment under weak property rights, with implications for indigenous title claims

We explore how three parties bargain over a windfall created by a development project given negative spillover on only one party's property. We compare how weak and strong property rights affect negotiation outcomes and fairness. With strong property rights, parties secure equal payment. With weak rights, parties reimburse costs and divide surplus so the developer is simply indifferent, nothing more. These results are meaningful for Indigenous in Canada: without strong property rights, the Crown's duty to consult may still yield dissatisfaction because of improper compensation.

Dispositional and situational factors on bargaining concession rates and outcomes: predictive power of NIMBuS–an integrated model of Buyer-Seller negotiations

We propose a process model that examines the antecedents and consequences of bargaining concession rates with managerially relevant constructs grounded in social psychology to predict negotiation outcomes in a sales setting involving multiple issues. The situational factors of relative power, constituent’s monitoring, time pressure; and dispositional factors of bargainer’s personality toughness and risk-taking propensity are integrated to test the associated set of hypotheses. Our novel approach employs a fractional factorial design experiment to test the predictions of our NIMBuS solution. The results of our sophisticated bargaining experiment support our model and hypotheses and add to the literature for empirical generalizability. We find in our integrated test that concession rates tend to be lower when bargainers are in a higher relative power position, are under lower time pressure, have higher personality-toughness, or have a higher risk-taking propensity. The underpinning of economic models asserting the importance of discount rates for concession-making does not hold. Our results indicate that the cost-prohibitive mechanism of organizational monitoring of salespeople may not be needed. Importantly, under asymmetric bargaining power situations, our model predicts actual outcomes better than the Nash solution. The critical importance of integrating social-psychological factors to understand the bargaining process and improve predicted outcomes is underscored.

Gotta Have Money to Make Money? Bargaining Behavior and Financial Need of Microentrepreneurs

Bargaining over real prices with microenterprise owners in Ghana, we show that sellers with less per capita household liquidity agree to lower sale prices. This relationship is robust across firms and within firms over time, even after controlling for a plethora of time-varying observables. A computerized bargaining experiment, with randomized initial payout sizes, corroborates the real-bargaining findings. This pattern can be explained by an application of classical bargaining theory that includes endowments and utility functions with decreasing absolute risk aversion. The potential poverty-multiplying implications of pricing behavior is a key frontier in understanding barriers to the profitability of microenterprises. (JEL D22, G51, L25, L26, O12, O14)

Wage bargaining in a matching market: Experimental evidence

Wage negotiation plays a central role in the dynamics of search and matching models. We explore the theoretical wage predictions of the canonical search and matching model of Diamond (1982) in laboratory bargaining experiments. Overall, wages in the experiment are less responsive to changes in the market conditions than theory predicts. Wages respond to changes in unemployment insurance in the correct direction, yet the size of the response is about half of what theory predicts. On the other hand, contrary to theory, wages are unresponsive to changes in the level of unemployment. We also find that wages of new matches are more sensitive than wages of on-going matches, and that the duration of unemployment influences wages in certain settings.

The determinants of multilateral bargaining: a comprehensive analysis of Baron and Ferejohn majoritarian bargaining experiments

We analyze the data sets of all majoritarian Baron and Ferejohn (Am Political Sci Rev 83(4):1181–1206, 1989) experiments through 2018. By exploiting the variation of the experimental parameters, we are able to identify how group size, discount factor (cost of agreement delay), voting weights, and communication affect bargaining outcomes and dynamics. The outcomes are qualitatively in line with the stationary subgame perfect equilibrium, i.e., minimum winning coalitions are modal; proposers demand larger shares than non-proposers; and most agreements are reached without delay. Experience and communication between players move outcomes closer to the equilibrium. However, bargaining dynamics are not stationary. Behavior following a disagreement is history-dependent in the form of retaliation towards failed proposers and their supporters, which, if rationally expected, may deter proposers from demanding high shares.

The Power of Personality Traits in Allocation Decision-Making: A Secondary Analysis of a Laboratory Experiment

Individual differences have been addressed by many authors in social sciences, however personality has been neglected. The purpose of this thesis is to investigate the role of personality in social decision-making situations. Prior researches on the role of personality either focused on how personality influences social and economic preferences or on the link between personality and influence in social decision-making. The present thesis intends to combine these two aspects with the help of a secondary analysis of a bargaining experiment. To test personality, the Five Factor Model was included and social preferences were measured with the help of social value orientation. The findings show that two personality dimensions (Agreeableness and Conscientiousness) indicate social preferences and four personality dimensions (Agreeableness, Extraversion, Neuroticism, and Conscientiousness) influence the ability to use structural power. Furthermore, it has been found that the link of personality and bargaining behavior is moderated by social preferences. The findings of the present thesis provide various theoretical and empirical implications for personality psychology, human resource management, and organizational behavior. Keywords: Social decision-making; fairness; personality; Five Factor Model; social value orientation.

International Territorial Dispute Preferences in China and the United States

Within international relations theory, there is significant disagreement on the nature and significance of leaders’ dispute outcome preferences. While many variants of realism assume that such preferences are relatively fixed and homogeneous, both the liberal and the constructivist schools view them as significant variables. This debate remains unresolved because, for the standard large-sample conflict data sets, there are no direct measures of leadership preferences over outcomes in given types of international disputes. Using a conflict bargaining experiment, we ask whether, after controlling for the effects of relative power and initial conditions, leadership preferences have a statistically significant impact. We use two different country samples—from China and the United States—to examine whether the impact of leadership preferences varies internationally. We find that realist-style preferences are a special rather than a general case, and that such differences have significant implications for understanding continuities and changes in Chinese and US foreign policies.

The impact of group identity on coalition formation

Bargaining and coalition building are a central part of modern politics. We argue that majoritarian bargaining is important for the formation of coalitions and that group-identity preferences have an impact on partner selection. We tested the effect of gender, race, and ideological distance in a majority-rule bargaining experiment and found that ideological distance significantly affected the likelihood and amount offered to potential partners. We concluded that formateurs are not necessarily purely rational actors pursuing policy goals and/or the benefits of office. Rather, they also care about the identity of their partners, preferring others who are like themselves.

Land division: A lab-in-the-field bargaining experiment

We design a framed bargaining experiment to explore how farmers allocate inherited land. In the experiment, two players with heterogeneous productivity inherit a land plot yielding a risky production, and some tokens to bargain over a land allocation. We conduct this experiment in Colombia with 256 participants from rural municipalities and 120 undergraduate students. Although the efficient, the non-cooperative, and the cooperative solutions of this game predict that the most productive player accrues most of the land, we find that 75% of the bargaining interactions yield egalitarian but inefficient land divisions. We implemented a treatment variation in which a costly disagreement is the only outcome leading to land equality. The single disagreement observed in this treatment weakens the support for preferences for egalitarian outcomes as the driver of inefficient allocations. We discuss alternative explanations based on the salience of equality heuristics, over-valuation of land, and sequential cooperative bargaining.

Language effects on bargaining.

Language is critical to coordination in groups. Though, how language affects coordination in groups is not well understood. We prime distributive and integrative language in a bargaining experiment to better understand the links between group outcomes and communication. We accomplish this by priming interests or positions language in randomized groups. We find that priming positions as opposed to interests language leads to agreements where controllers, subjects with unilateral authority over the group outcome, receive a larger share of the benefits but where the total benefits to the group are unaffected. In contrast to common justifications for the use of integrative language in bargaining, our experimental approach revealed no significant differences between priming interests and positions language in regards to increasing joint outcomes for the groups. Across treatments, we find subjects that use gain frames and make reference to visuals aids during bargaining experience larger gains for the group, while loss frames and pro-self language experience larger gains for the individual through side payments. This finding suggests a bargainer’s dilemma: whether to employ language that claims a larger share of group’s assets or employ language to increase joint gains.

The Determinants of Multilateral Bargaining: A Comprehensive Analysis of Baron and Ferejohn Majoritarian Bargaining Experiments

We collected and analyzed the data sets of all majoritarian Baron and Ferejohn (1989 Am. Pol. Sci. Rev.) experiments through 2018. By exploiting the variation of experimental parameters such as group size and discount factor we are able to test whether or not the theoretical point predictions and comparative statics hold and find virtually no support for the theory. Novel findings are reported about the effect of group size and discounting on distribution of the surplus, the proposer's share, agreement delay, and voting behavior. We also report on off-equilibrium behavior (after subjects fail to agree) and identify strong history-dependent behavior in the form of punishment and loyalty to previous proposers.

Self-serving invocations of shared and asymmetric history in negotiations

The existence of an asymmetric history between bargainers can trigger self-serving beliefs about the fair settlement of a subsequent dispute, ultimately leading to bargaining impasse. In a two-stage bargaining experiment we demonstrate that dyads who share a history that produced wealth asymmetries between them are less likely to settle in a subsequent negotiation than when the same wealth asymmetry stems from negotiators’ independent histories. When negotiators share an asymmetric history, the individual who previously lost out in the first stage believes that s/he deserves compensation in the second stage, but the individual who prevailed in the first stage believes that compensation is not warranted. These divergent, self-serving views about a fair settlement – and the resulting irreconcilable demands – lead to bargaining impasse. We find, further, that unbiased judges side with the losers in the first stage; they believe that it is fair for them to be compensated in the second stage. Indeed, this is true, albeit to a lesser extent, even if the winner and loser had not directly interacted with one another – i.e., if their history is not shared.

Legislative bargaining with costly communication

We investigate the effects of voting rules on delay in a multilateral bargaining experiment with costly communication. Our design is based on a variant of the Baron–Ferejohn framework. Communication takes place after a proposer is selected and before a proposal is made. In contrast to prior experiments, communication is directly associated with costs in our setup. Specifically, every second of communication increases the probability that the game is terminated before a proposal can be made. In case of ‘breakdown’, each player receives an exogenously fixed disagreement value. Those values sum up to less than the amount of the available surplus, implying that delay owing to communication is costly. We vary the decision rule (majority versus unanimity) as well as the distribution of disagreement values (symmetric or asymmetric). We find that unanimity rule leads to longer communication delays and more frequent breakdowns in asymmetric, but not in symmetric situations.

Ownership, punishment, and norms in a real-effort bargaining experiment

This paper examines the importance of prior ownership and punishment in bargaining over a jointly produced surplus. Using a laboratory experiment, participants jointly produce a surplus using a real effort task with the entire surplus given to the person who put in higher effort. Participants then bargain over the surplus in a series of ultimatum games. Treatments varied whether the proposer or responder received the surplus prior to bargaining and the threat point of the responder. The results suggest that proposers respect prior ownership when the responder has a strong ability to punish, but not when punishment is weak. Responders respect prior ownership when their ability to punish is weak, but reject at high rates when they have strong punishment. An independent measure of individual sensitivity to rule following can explain some of the results, adding support to the theory that individual behavior in bargaining is driven in part by adherence to social norms.

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’ 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.

Self-selecting random or cumulative pay? A bargaining experiment

An incentive scheme in a multi-task experiment may trigger different types of behavior in participants. This experimental study allows participants to decide between being paid to complete a random task or being paid an average across all tasks completed in a bargaining game where the buyer and seller have partly conflicting interests and are asymmetrically informed. We find that both past experience and individual characteristics have a significant effect on the payment scheme selected and the final trading result. Although the payment method is likely to be correlated with risk preferences, it may also be influenced by ego-defensive concerns. Analysis of the self-selected Random Lottery Incentives scheme (RLI) and the Cumulative Scheme (CS) shows both individual and social effects: sellers who prefer CS over RLI receive a larger share of the surplus, and (female) buyers choosing RLI play with a lower degree of trust with the aim of closing better deals.