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Discounting in finite-time bargaining experiments

Author

Listed:
  • Tom-Reiel Heggedal

    (BI Norwegian Business School)

  • Thomas McKay

    (BI Norwegian Business School)

Abstract

This paper examines the impact of different ways of inducing discounting in alternating-offer bargaining games in the lab. We examine this by following the framework of Ochs and Roth (Am Econ Rev, pp. 355–384, 1989) and test whether the model’s predictions find support in data under three different discounting implementations; the shrinking-pie procedure, the effective-discounting procedure and the bargaining-delay procedure. We find no sensitivity to the number of periods in any of the three procedures. However, we find mixed evidence for the effect of changing the discount factor in the effective-discounting procedure and the shrinking-pie procedure, but the magnitude of effects are small. Furthermore, there was more disagreement in both the effective-discounting and bargaining-delay procedures than in the shrinking-pie procedure.

Suggested Citation

  • Tom-Reiel Heggedal & Thomas McKay, 2024. "Discounting in finite-time bargaining experiments," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 10(2), pages 504-518, December.
    • Handle: RePEc:spr:jesaex:v:10:y:2024:i:2:d:10.1007_s40881-024-00174-6
    DOI: 10.1007/s40881-024-00174-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Alternate-offer bargaining; Laboratory experiment; Discounting; Internet experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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