Bargaining and Network Structure: An Experiment

47 Pages Posted: 4 Nov 2000

See all articles by Gary Charness

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics

Margarida Corominas-Bosch

Universitat Pompeu Fabra

Guillaume R. Frechette

New York University (NYU) - Department of Economics

Date Written: April 20, 2005

Abstract

We consider bargaining in a bipartite network of buyers and sellers, who can only trade with the limited number of people with whom they are connected. Such networks could arise due to proximity issues or restricted communication flows, as with information transmission of job openings, business opportunities, and transactions not easily regulated by external authorities. We perform an experimental test of a graph-theoretic model that allows us to decompose any two-sided network into simple networks of three types, with unique predictions about equilibrium prices for the networks in our sessions. We begin with two separate simple networks, which are then joined by an additional link. Participants appear to quickly grasp important characteristics of the networks. The results diverge sharply depending on how this connection is made, typically conforming to the theoretical directional predictions. Payoffs can be systematically affected even for agents who are not connected by the new link. We find evidence of a form of social learning - the shares (publicly) allocated to others in the past affect what one is willing to accept.

Keywords: Bargaining, Experiment, Graph Theory, Network

JEL Classification: B49, C70, C78, C91, C92, D40

Suggested Citation

Charness, Gary and Corominas-Bosch, Margarida and Frechette, Guillaume R., Bargaining and Network Structure: An Experiment (April 20, 2005). Available at SSRN: https://ssrn.com/abstract=248669 or http://dx.doi.org/10.2139/ssrn.248669

Gary Charness (Contact Author)

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States
805-893-2412 (Phone)
805-893-8830 (Fax)

Margarida Corominas-Bosch

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
08005 Barcelona
Spain

Guillaume R. Frechette

New York University (NYU) - Department of Economics ( email )

19 West Fourth St., 6th floor
New York, NY 10012
United States

HOME PAGE: http://https://files.nyu.edu/gf35/public/html/econ.htm

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