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Asymmetric information in simple bargaining games: An experimental study

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  • Klempt, Charlotte
  • Pull, Kerstin
  • Stadler, Manfred

Abstract

Bilateral bargaining situations are often characterized by informational asymmetries concerning the size of what is at stake: in some cases, the proposer is better informed, in others, it is the responder. We analyze the effects of both types of asymmetric information on proposer behavior in two different situations which allow for a variation of responder veto power: the ultimatum and the dictator game. We find that the extent to which proposers demand less in the ultimatum as compared to the dictator game is (marginally) smaller when the proposer is in the superior information position. Further we find informed proposers to exploit their informational advantage by offering an amount that does not reveal the true size of the pie, with proposers in the ultimatum game exhibiting this behavioral pattern to a larger extent than those in the dictator game. Uninformed proposers risk imposed rejection when they ask for more than potentially is at stake, and ask for a risk premium in dictator games. We concentrate on proposers, but also explore responder behavior: We find uninformed responders to enable proposers' hiding behavior, and we find proposer intentionality not to play an important role for informed responders when they decide whether to accept or reject an offer by an (uninformed) proposer.

Suggested Citation

  • Klempt, Charlotte & Pull, Kerstin & Stadler, Manfred, 2017. "Asymmetric information in simple bargaining games: An experimental study," University of Tübingen Working Papers in Business and Economics 97, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:97
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    Cited by:

    1. Werner Güth & Kerstin Pull & Manfred Stadler & Alexandra K. Zaby, 2017. "Blindfolded vs. Informed Ultimatum Bargaining – A Theoretical and Experimental Analysis," German Economic Review, Verein für Socialpolitik, vol. 18(4), pages 444-467, November.
    2. Jennie Huang & Judd B. Kessler & Muriel Niederle, 2024. "Fairness has less impact when agents are less informed," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 155-174, March.
    3. Mago, Shakun D. & Pate, Jennifer & Razzolini, Laura, 2024. "Experimental evidence on the role of outside obligations in wage negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 528-548.
    4. Adam Ayaita & Kerstin Pull, 2022. "Positional preferences and narcissism: evidence from ‘money burning’ dictator games," Applied Economics Letters, Taylor & Francis Journals, vol. 29(3), pages 267-271, February.
    5. Federica Alberti & Werner Güth & Kei Tsutsui, 2020. "Experimental effects of institutionalizing co-determination by a procedurally fair bidding rule," Working Papers in Economics & Finance 2020-10, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    6. Engel, Christoph & Goerg, Sebastian J., 2018. "If the worst comes to the worst: Dictator giving when recipient’s endowments are risky," European Economic Review, Elsevier, vol. 105(C), pages 51-70.
    7. Andrea Morone & Paola Tiranzoni, 2020. "Bargaining in a "Pawn Shop": A field experiment to study WTA," Framed Field Experiments 00702, The Field Experiments Website.

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    More about this item

    Keywords

    Bargaining; Information; Experimental Games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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