IDEAS home Printed from https://ideas.repec.org/p/yon/wpaper/2025rwp-238.html
   My bibliography  Save this paper

Unveiling the Failure of Positive Selection

Author

Listed:
  • Dongkyu Chang

    (City University of Hong Kong)

  • Duk Gyoo Kim

    (Yonsei University)

  • Wooyoung Lim

    (Hong Kong University of Science and Technology)

Abstract

In dynamic screening problems between an uninformed seller and a privately-informed buyer, theory suggests that the presence of the buyer’s outside option leads to a significant surplus for the seller. However, this prediction relies on multiple layers of positive selection reasoning. To examine whether participants demonstrate positive selection in their belief updates, we conduct a two-round bargaining experiment with finite price alternatives, which enable us to identify first-, second-, and third-order positive selection reasoning. Few subjects adhere to the equilibrium reasoning, and the majority fail even at the first-order reasoning. Consequently, the seller payoffs fall short of the theoretical benchmark.

Suggested Citation

  • Dongkyu Chang & Duk Gyoo Kim & Wooyoung Lim, 2025. "Unveiling the Failure of Positive Selection," Working papers 2025rwp-238, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2025rwp-238
    as

    Download full text from publisher

    File URL: http://121.254.254.220/repec/yon/wpaper/2025rwp-238.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Positive Selection; Outside Options; Laboratory Experiments;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yon:wpaper:2025rwp-238. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: YERI (email available below). General contact details of provider: https://edirc.repec.org/data/eryonkr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.