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Bargaining and reputation: an experiment on bargaining in the presence of behavioural types

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posted on 2023-06-08, 23:12 authored by Matthew EmbreyMatthew Embrey, Guillaume R Fréchette, Steven F Lehrer
We conduct a series of laboratory experiments to understand what role commitment and reputation play in bargaining. The experiments implement the Abreu and Gul (2000) bargaining model that demonstrates how introducing behavioral types, which are obstinate in their demands, creates incentives for all players to build reputations for being hard bargainers. The data are qualitatively consistent with the theory, as subjects mimic induced types. Furthermore, we find evidence for the presence of complementary types, whose initial demands acquiesce to induced behavioural demands. However, there are quantitative deviations from the theory: subjects make aggressive demands too often and participate in longer conflicts before reaching agreements. Overall, the results suggest that the Abreu and Gul (2000) model can be used to gain insights to bargaining behavior, particularly in environments where the process underlying obstinate play is well established.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Review of Economic Studies

ISSN

0034-6527

Publisher

Oxford University Press

Issue

2

Volume

82

Page range

608-631

Department affiliated with

  • Economics Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2015-11-16

First Open Access (FOA) Date

2016-12-15

First Compliant Deposit (FCD) Date

2016-12-15

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