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Bargaining or Searching for a Better Price? - An Experimental Study

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  • Francesco Feri
  • Anita Gantner

Abstract

This experimental study investigates two bargaining games with twosided incomplete information between a seller and a buyer. In the first game with no outside options many subjects do not use the incomplete information to their advantage as predicted. We find that a model with adjusting priors better explains observed behavior. The second game gives the buyer the option to buy via search or return to bargaining. Here many buyers choose a bargaining agreement when a search outcome is predicted. For those who opt out, search outcomes are overall efficient and behavior is relatively close to the optimal search policy.

Suggested Citation

  • Francesco Feri & Anita Gantner, 2010. "Bargaining or Searching for a Better Price? - An Experimental Study," Working Papers 2010-27, Faculty of Economics and Statistics, Universität Innsbruck.
    • Handle: RePEc:inn:wpaper:2010-27
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    References listed on IDEAS

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    Cited by:

    1. Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00881151, HAL.
    2. Possajennikov, Alex & Saran, Rene, 2023. "(In)efficiency in private value bargaining with naive players: Theory and experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 42-61.

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    More about this item

    Keywords

    Bargaining Experiment; Outside Option; Search;
    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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