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How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm

Anbarci, N.; Feltovich, N.

How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm Thumbnail


Authors

N. Feltovich



Abstract

A recurring puzzle in bargaining experiments is that individuals under-exploit their bargaining position, compared to theoretical predictions. We conduct an experiment using two institutions: Nash demand game (NDG) and unstructured bargaining game (UBG). Unlike most previous experiments, disagreement payoffs are earned rather than assigned, and about one-fourth of the time, one bargainer's disagreement payoff is more than half the cake size (“dominant bargaining power”), so that equal splits are not individually rational. Subjects under-respond to their bargaining position most severely in the NDG without dominant bargaining power. Responsiveness increases in the UBG, but is still lower than predicted; the same is true for the NDG with dominant bargaining power. Only in the UBG with dominant bargaining power – the combination of a bargaining institution with low strategic uncertainty and elimination of the 50–50 “security blanket” – do subjects approximately fully exploit their bargaining position.

Citation

Anbarci, N., & Feltovich, N. (2018). How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm. Journal of Economic Behavior and Organization, 145, 320-334. https://doi.org/10.1016/j.jebo.2017.11.020

Journal Article Type Article
Acceptance Date Nov 23, 2017
Online Publication Date Nov 29, 2017
Publication Date Jan 31, 2018
Deposit Date Aug 16, 2018
Publicly Available Date May 29, 2019
Journal Journal of Economic Behavior and Organization
Print ISSN 0167-2681
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 145
Pages 320-334
DOI https://doi.org/10.1016/j.jebo.2017.11.020
Public URL https://durham-repository.worktribe.com/output/1317228

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