Abstract
We report results from a laboratory experiment on strategic bargaining with indivisibilities studying the role of asymmetries, both in preferences and institutions. We find that subjects do not fully grasp the equilibrium effects asymmetries have on bargaining power and identify how subjects’ observed behavior systematically deviates from theoretical predictions. The deviations are especially pronounced in case of asymmetric institutions which are modelled as probabilities of being the proposer. Additionally, in contrast to previous experimental work, we observe larger than predicted proposer power since subjects frequently propose and accept their second-preferred option. Quantal response equilibrium and risk aversion explain behavior whenever probabilities are symmetric, but less so when asymmetric. We propose the ‘recognition is power’ heuristic which equates bargaining power with recognition probabilities to explain these findings.
| Original language | English |
|---|---|
| Pages (from-to) | 329-351 |
| Number of pages | 23 |
| Journal | Social Choice and Welfare |
| Volume | 52 |
| Issue number | 2 |
| Early online date | 10 Sept 2018 |
| DOIs | |
| Publication status | Published - 14 Feb 2019 |
Funding
Acknowledgments The authors are very grateful to the Associate Editor and two anonymous reviewers for valuable comments. We also thank Rebecca Morton, Matthew Embrey, Arthur Schram, Simon Siegenthaler, as well as (seminar) participants at the 2015 UECE Lisbon Meetings in Game Theory and Applications, the 2016 NYU Global Network Experimental Social Sciences Workshop, the University of Amsterdam and the Vrije Universiteit Amsterdam. Financial support from the University of Amsterdam Research Priority Area in Behavioral Economics and the Department of Econometrics and OR of the Vrije Universiteit Amsterdam is gratefully acknowledged.
| Funders | Funder number |
|---|---|
| Department of Econometrics | |
| Universiteit van Amsterdam |
