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Efficiency in Bargaining Games with Alternating Offers

Author

Listed:
  • Vjollca Sadiraj

    (Georgia State University)

  • Juan Sun

    (Georgia State Univeristy)

Abstract

Bargaining games model situations in which the realization of potential benefits is jeopardized by conflicting bargaining powers. Most of the literature on bargaining behavior focuses on bargaining over gains. Exploration of behavior in situations under which agents bargain over losses has received only limited attention from the profession. An important question is whether the negative effect of competing bargaining powers on the efficiency of agreements is more severe in bargaining over gains or over losses. Another understudied research question is how the likelihood that the outcome of a negotiation will actually be implemented affects efficiency of bargaining. We design an experiment that addresses these two questions. We find that in alternating offers games, outcomes of bargaining over gains are more efficient than outcomes of bargaining over losses. We also find that the likelihood that an interaction is implemented has a positive effect on the efficiency of bargaining.

Suggested Citation

  • Vjollca Sadiraj & Juan Sun, 2012. "Efficiency in Bargaining Games with Alternating Offers," Economics Bulletin, AccessEcon, vol. 32(3), pages 2366-2374.
    • Handle: RePEc:ebl:ecbull:eb-12-00497
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    References listed on IDEAS

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    1. James Andreoni & Emily Blanchard, 2006. "Testing subgame perfection apart from fairness in ultimatum games," Experimental Economics, Springer;Economic Science Association, vol. 9(4), pages 307-321, December.
    2. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-1095, December.
    3. Wakker,Peter P., 2010. "Prospect Theory," Cambridge Books, Cambridge University Press, number 9780521765015.
    4. Ken Binmore, 2007. "Does Game Theory Work? The Bargaining Challenge," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026074, April.
    5. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
    6. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, September.
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    Cited by:

    1. James Cox & Vjollca Sadiraj & Ulrich Schmidt, 2015. "Paradoxes and mechanisms for choice under risk," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 215-250, June.
    2. Brown, Alexander L. & Healy, Paul J., 2018. "Separated decisions," European Economic Review, Elsevier, vol. 101(C), pages 20-34.
    3. Kroll, Eike B. & Morgenstern, Ralf & Neumann, Thomas & Schosser, Stephan & Vogt, Bodo, 2014. "Bargaining power does not matter when sharing losses – Experimental evidence of equal split in the Nash bargaining game," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 261-272.

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    More about this item

    Keywords

    Efficiency; Bargaining; Experiments; Payoff Protocols;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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