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A General Experiment on Bargaining in Demand Games with Outside Options

Lawrence M. Kahn and J. Keith Murnighan
The American Economic Review
Vol. 83, No. 5 (Dec., 1993), pp. 1260-1280
Stable URL: http://www.jstor.org/stable/2117560
Page Count: 21
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A General Experiment on Bargaining in Demand Games with Outside Options
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Abstract

This experiment factorially combined the major independent variables from previous demand-game experiments (discount factors, outside options, termination probability, and first mover). Game-theoretic predictions were largely refuted by the data, and outcomes were often inefficient. Players without an outside option demanded more than predicted, and those with an option appeared to anticipate this behavior. Nonetheless, there was a positive relationship between differences in equilibrium predictions and differences in behavior. Bargainers appeared to focus on a minimally acceptable offer in making their demands and in considering the likelihood that the other party would accept their offer.

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