Multistage Sealed-Bid k-Double Auctions: An Experimental Study of Bilateral Bargaining

ADVANCES IN UNDERSTANDING STRATEGIC BEHAVIOUR: GAME THEORY, EXPERIMENTS, AND BOUNDED RATIONALITY: ESSAYS IN HONOUR OF WERNER GUTH, London: Palgrave, 2004-2005

15 Pages Posted: 18 Oct 2004 Last revised: 24 Feb 2008

See all articles by James E. Parco

James E. Parco

Colorado College

Amnon Rapoport

University of Arizona - Eller College of Management

Darryl A. Seale

University of Nevada, Las Vegas

William E. Stein

Texas A&M University - Mays Business School

Rami Zwick

University of California, Riverside

Abstract

We extend the sealed-bid k-double-auction mechanism from a single- to two-round game where offers are made simultaneously during each round. If an agreement is reached on round 1, then the traders realize their profit and the game is over. If not, equipped with information about the round 1 bids and asks, the two traders move to the second and final round. Our main hypothesis is that, if payoffs are not discounted, the traders will not bargain seriously in round 1, namely, they will reveal only limited information about their (private) reservation values. In round 2 they will play the Chatterjee-Samuelson linear equilibrium (1983). The main hypothesis is tested in an iterated game with several groups of players who differ from one another in their strategic sophistication. Our results show that strategically sophisticated players learn not to disclose information on round 1 quicker than inexperienced traders and approach linear equilibrium play on the second round of the bargaining.

Keywords: Sealed-bid k-double auction, multistage, experiment, incomplete information

JEL Classification: C72, C78, D81

Suggested Citation

Parco, Jim and Rapoport, Amnon and Seale, Darryl A. and Stein, William E. and Zwick, Rami, Multistage Sealed-Bid k-Double Auctions: An Experimental Study of Bilateral Bargaining. ADVANCES IN UNDERSTANDING STRATEGIC BEHAVIOUR: GAME THEORY, EXPERIMENTS, AND BOUNDED RATIONALITY: ESSAYS IN HONOUR OF WERNER GUTH, London: Palgrave, 2004-2005. Available at SSRN: https://ssrn.com/abstract=605230

Jim Parco (Contact Author)

Colorado College ( email )

Department of Economics and Business
14 E. Cache la Poudre St.
Colorado Springs, CO 80903
United States
719-389-6416 (Phone)
719-389-6927 (Fax)

HOME PAGE: http://www.coloradocollege.edu/dept/EC/parco.asp

Amnon Rapoport

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-9325 (Phone)
520-621-4171 (Fax)

Darryl A. Seale

University of Nevada, Las Vegas ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

William E. Stein

Texas A&M University - Mays Business School ( email )

INFO Dept.
MS4217
College Station, TX 77843-4217
United States
979-845-4339 (Phone)

Rami Zwick

University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

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