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Articles 1 - 6 of 6
Full-Text Articles in Social and Behavioral Sciences
Optimally Stubborn, Anna Sanktjohanser
Optimally Stubborn, Anna Sanktjohanser
Cowles Foundation Discussion Papers
I consider a bargaining game with two types of players – rational and stubborn. Rational players choose demands at each point in time. Stubborn players are restricted to choose from the set of “insistent” strategies that always make the same demand and never accept anything less. However, their initial choice of demand is unrestricted. I characterize the equilibria of this game. I show that while pooling equilibria exist, fully separating equilibria do not. Relative to the case with exogenous behavioral types, strong behavioral predictions emerge: in the limit, players randomize over at most two demands. However, unlike in a world …
Selling 'Money' On Ebay: A Field Study Of Surplus Division, Alia Gizatulina, Olga Gorelkina
Selling 'Money' On Ebay: A Field Study Of Surplus Division, Alia Gizatulina, Olga Gorelkina
Cowles Foundation Discussion Papers
We study the division of trade surplus in a natural field experiment on German eBay. Acting as a seller, we offer Amazon gift cards with face values of up to 500 Euro. A random selection of buyers, the subjects of our experiment, make price offers according to the rules of eBay. Using a novel decomposition method, we infer the offered shares of trade surplus from the data and find that the average share proposed to the seller amounts to about $30 \%$. Additionally, we document: (i) insignificant effects of stake size; (ii) poor use of strategically relevant public information; and …
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
Cowles Foundation Discussion Papers
This paper solves for the set of equilibrium payoffs in bargaining with interdependent values when the informed party makes all offers, as discounting vanishes. The seller of a good is informed of its quality, which affects both his cost and the buyer’s valuation, but the buyer is not. To characterize this payoff set, we derive an upper bound, using mechanism design with limited commitment. We then prove that this upper bound is tight, by showing that all its extreme points are equilibrium payoffs. Our results shed light on the role of different forms of commitment on the bargaining process. In …
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
Cowles Foundation Discussion Papers
We examine the buyer-seller problem under different levels of commitment. The seller is informed of the quality of the good, which affects both his cost and the buyer’s valuation, but the buyer is not. We characterize the allocations that can be achieved through mechanisms in which, unlike with full commitment, the buyer has the option to “walk away” after observing a given offer. We further characterize the equilibrium payoffs that can be achieved in the bargaining game in which the seller makes all the offers, as the discount factor goes to one. This allows us to identify how different levels …
A Behavioral Model Of Bargaining With Endogenous Types, Dilip Abreu, David G. Pearce
A Behavioral Model Of Bargaining With Endogenous Types, Dilip Abreu, David G. Pearce
Cowles Foundation Discussion Papers
We enrich a simple two-person bargaining model by introducing “behavioral types” who concede more slowly than does the average person in the economy. The presence of behavioral types profoundly influences the choices of optimizing types. In equilibrium, concessions are calculated to induce “reciprocity”: a substantial concession by player i is followed by a period in which j is much more likely to make a concession than usual. This favors concessions by i that are neither very small nor large enough to end the bargaining immediately. A key difference from the traditional method of perturbing a game is that the actions …
Bargaining And Markets: Complexity And The Walrasian Outcome, Hamid Sabourian
Bargaining And Markets: Complexity And The Walrasian Outcome, Hamid Sabourian
Cowles Foundation Discussion Papers
Rubinstein and Wolinsky (1990b) consider a simple decentralized market in which agents either meet randomly or choose their partners volunatarily and bargain over the terms on which they are willing to trade. Intuition suggests that if there are no transaction costs, the outcome of this matching and bargaining game should be the unique competitive equilibrium. This does not happen. In fact, Rubinstein and Wolinsky show that any price can be sustained as a sequential equilibrium of this game. In this paper, I consider Rubinstein and Wolinsky’s model and show that if the complexity costs of implementing strategies enter players’ preferences …