Bargaining and reputation: An experiment on bargaining in the presence of behavioural types

M.S. Embrey, G. Frechette, S. Lehrer

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

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 behavioural demands. However, there are quantitative deviations from the theory: subjects make aggressive demands too often and participate in longer 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.

Data source: experiment; data stored and made available on journal website
Original languageEnglish
Pages (from-to)608-631
Number of pages24
JournalReview of Economic Studies
Volume82
Issue number2
DOIs
Publication statusPublished - Apr 2015

Keywords

  • Bargaining
  • reputation
  • Experiment
  • 2-SIDED INCOMPLETE INFORMATION
  • REPEATED TRUST GAME
  • ENTRY GAMES
  • MODEL
  • EQUILIBRIUM
  • COORDINATION
  • EXPECTATIONS
  • COOPERATION
  • COMPETITION
  • FAIRNESS

Cite this