Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioral Types
Guillaume R. Frechette
New York University (NYU) - Department of Economics
Steven F. Lehrer
Queen's University - School of Policy Studies; National Bureau of Economic Research (NBER)
Maastricht University - Department of Economics
October 4, 2011
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 behavioral demands. However, there are important quantitative deviations from the theory: subjects are inclined to make aggressive demands too often, and to participate in excessively long 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.
Number of Pages in PDF File: 32
Keywords: Bargaining, reputation, experiments
JEL Classification: C72, C78, C90working papers series
Date posted: October 5, 2011
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