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

Matthew Embrey, Guillaume R. Fréchette, Steven F. Lehrer

    Research output: Contribution to journalArticle

    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.

    Original languageEnglish (US)
    Article numberrdu029
    Pages (from-to)608-631
    Number of pages24
    JournalReview of Economic Studies
    Volume82
    Issue number2
    DOIs
    StatePublished - Aug 1 2013

    Keywords

    • Bargaining
    • Experiment
    • Reputation

    ASJC Scopus subject areas

    • Economics and Econometrics

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