An Alternative Approach to Explaining Bargaining Behavior in Simple Sequential Games

21 Pages Posted: 12 Jun 2006

See all articles by Chun-Lei Yang

Chun-Lei Yang

Joachim Weimann

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

tanasios itropoulos

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration

Abstract

For simple sequential games, the payoff structure has certain bargaining power implication. Intuitively, certain actions may have the effect of the carrot and the stick as sanctioning means. Fair outcomes can be alternatively viewed as the consequence of their presence. Experimental data on various games are used to test the hypothesis of carrot and stick behaviour. We show that our stick and carrot heuristic neatly captures puzzling phenomena in a wide class of simple sequential games. The results support the view that punishing subjects are not worse off than myopic pay-off maximizers as long as subjects are involved in a repeated strangers scheme.

Suggested Citation

Yang, Chun-Lei and Weimann, Joachim and Mitropoulos, Atanasios, An Alternative Approach to Explaining Bargaining Behavior in Simple Sequential Games. Pacific Economic Review, Vol. 11, No. 2, pp. 201-221, June 2006, Available at SSRN: https://ssrn.com/abstract=906916 or http://dx.doi.org/10.1111/j.1468-0106.2006.00310.x

Joachim Weimann

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Atanasios Mitropoulos

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

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