From Ultimatum to Nash Bargaining: Theory and Experimental Evidence

CentER Discussion Paper No. 2003-41

32 Pages Posted: 21 Sep 2004

See all articles by Sven Fischer

Sven Fischer

University of Newcastle - Economics

Werner Güth

Max Planck Institute for Research on Collective Goods; Luiss Guido Carli University

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Andreas Stiehler

Humboldt Universität zu Berlin

Date Written: April 15, 2003

Abstract

We examine theoretically and experimentally the strategic behavior of first and second movers in a two party bargaining game with uncertain information transmission. When the first mover states her demand, she does not know whether the second mover will be informed about it. If the second mover is informed, she can either accept or reject the offer, and payoffs are determined as in the ultimatum game. If she is not informed, the second mover states her own demand, and payoffs are determined as in the Nash demand game. In the experiment, we vary the commonly known probability of information transmission. Our main finding is that first movers' and uninformed second movers' behavior is qualitatively in line with the game theoretic solution, that is, first movers' (uninformed second movers') demands are lower (higher) the lower the probability of a signal.

Keywords: Commitment, imperfect observability, ultimatum bargaining game, Nash bargaining game, experiments

JEL Classification: C72, C78, C92

Suggested Citation

Fischer, Sven and Güth, Werner and Müller, Wieland and Stiehler, Andreas, From Ultimatum to Nash Bargaining: Theory and Experimental Evidence (April 15, 2003). CentER Discussion Paper No. 2003-41, Available at SSRN: https://ssrn.com/abstract=555778 or http://dx.doi.org/10.2139/ssrn.555778

Sven Fischer (Contact Author)

University of Newcastle - Economics ( email )

Newcastle-upon-Tyne NE1 7RU
United Kingdom

Werner Güth

Max Planck Institute for Research on Collective Goods

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Wieland Müller

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

Andreas Stiehler

Humboldt Universität zu Berlin ( email )

Unter den Linden 6
D-10178 Berlin, AK 10099
Germany
+49 30 2093 5720 (Phone)

HOME PAGE: http://www.wiwi.hu-berlin.de/staff/e/t3/andreas.stiehler

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