A Bargaining Experiment with Asymmetric Institutions and Preferences

Tinbergen Institute Discussion Paper 15-071/II

58 Pages Posted: 2 Jun 2015 Last revised: 21 Sep 2018

See all articles by Aaron Kamm

Aaron Kamm

New York University (NYU) - New York University Abu Dhabi

Harold Houba

VU University Amsterdam, Department of Econometrics; VU University Amsterdam, Tinbergen Institute

Date Written: July 1, 2018

Abstract

We report results from a laboratory experiment on strategic bargaining with indivisibilities studying the role of asymmetries, both in preferences and institutions. We find that subjects do not fully grasp the equilibrium effects asymmetries have on bargaining power and identify how subjects’ observed behavior systematically deviates from theoretical predictions. The deviations are especially pronounced in case of asymmetric institutions which are modelled as probabilities of being the proposer. Additionally, in contrast to previous experimental work, we observe larger than predicted proposer power since subjects frequently propose and accept their second-preferred option. Quantal response equilibrium and risk aversion explain behavior whenever probabilities are symmetric, but less so when asymmetric. We propose the ‘recognition is power’ heuristic which equates bargaining power with recognition probabilities to explain these findings.

Keywords: Committees; Indivisibilities; Institutions, Preferences; Quantal Response Equilibrium; Condorcet Paradox

JEL Classification: D71, D72, C92, C7

Suggested Citation

Kamm, Aaron and Houba, Harold E. D., A Bargaining Experiment with Asymmetric Institutions and Preferences (July 1, 2018). Tinbergen Institute Discussion Paper 15-071/II, Available at SSRN: https://ssrn.com/abstract=2613287 or http://dx.doi.org/10.2139/ssrn.2613287

Aaron Kamm (Contact Author)

New York University (NYU) - New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

HOME PAGE: http://sites.google.com/site/akammhome/

Harold E. D. Houba

VU University Amsterdam, Department of Econometrics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

VU University Amsterdam, Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

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