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How sensitive are bargaining outcomes to changes in disagreement payoffs?

Published online by Cambridge University Press:  14 March 2025

Nejat Anbarci  and
Nick Feltovich
Nejat Anbarci*
Affiliation:
School of Accounting, Economics and Finance, Deakin University, 70 Elgar Road, Burwood, VIC 3125, Australia
Nick Feltovich*
Affiliation:
Department of Economics, Monash University, Clayton, VIC 3800, Australia
*
e-mail: nejat.anbarci@deakin.edu.au
e-mail: nicholas.feltovich@monash.edu
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Abstract

We use a human-subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’ disagreement payoffs. Subjects bargain against changing opponents, with randomly drawn asymmetric disagreement outcomes that vary over plays of the game, and with complete information about disagreement payoffs and the cake size. We find that subjects only respond about half as much as theoretically predicted to changes in their own disagreement payoff and to changes in their opponent’s disagreement payoff. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, in both early and late rounds, and is robust to moderate changes in stake sizes. We show theoretically that standard models of expected utility maximisation are unable to account for this under-responsiveness, even when generalised to allow for risk aversion. We also show that quantal-response equilibrium has, at best, mixed success in characterising our results. However, a simple model of other-regarding preferences can explain our main results.

Keywords

Nash demand gameUnstructured bargainingDisagreementExperimentRisk aversionSocial preferenceOther-regarding behaviourBargaining power

JEL classification

D74: Conflict • Conflict Resolution • Alliances • Revolutions C78: Bargaining Theory • Matching Theory D81: Criteria for Decision-Making under Risk and Uncertainty C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 16 , Issue 4 , December 2013 , pp. 560 - 596
Copyright
Copyright © 2013 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-013-9352-1) contains supplementary material, which is available to authorized users.

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