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Bargaining with a partially-incentivized agent

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  • Ingersoll, William Robert
  • Roomets, Alex

Abstract

This paper explores the impact that agent bargaining (when one player represents another party in a bargaining situation for some form of compensation) has on the outcome of negotiations in a three-player setting. We conduct a laboratory experiment simulating a simple unstructured example of agent bargaining with various percentage-based compensation plans. We test hypotheses formulated using a Nash bargaining framework. We also propose novel behavioral explanations for the observed behavior. Our results suggest that compensation percentage has a non-monotonic effect on an agent’s bargaining effectiveness. We find that Nash bargaining does a poor job of explaining our observations, and that using a new solution concept we call the “minimization of differences” solution provides a promising alternative.

Suggested Citation

  • Ingersoll, William Robert & Roomets, Alex, 2020. "Bargaining with a partially-incentivized agent," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 96-115.
    • Handle: RePEc:eee:jeborg:v:171:y:2020:i:c:p:96-115
    DOI: 10.1016/j.jebo.2020.01.018
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