Positive and Negative Selection in Bargaining: An Experiment

Dongkyu Chang, Duk Gyoo Kim and Wooyoung Lim

No 9908, CESifo Working Paper Series from CESifo

Abstract: We consider infinite-horizon bargaining in which an uninformed seller sequentially makes a price offer to a privately informed buyer who decides whether to accept or reject it in every bargaining round. Existing theories suggest that the presence (absence) of an arbitrarily small outside option available to the buyer in this dynamic screening problem leads the seller (buyer) to enjoy a substantial surplus, and we examine the validity of the differences in the share of the surplus theoretically and experimentally. We first show that the theoretical differences collapse if an arbitrarily small fraction of optimistic buyers would believe that the sellers sometimes ask for a lower price in the subsequent rounds. We then present experimental evidence that the earnings of both the buyers and the sellers when the buyer has an outside option are not significantly different from those without the outside option. We find supporting evidence that some buyers reject the current-round offers, optimistically believing that the next offer would be more favorable to them.

Keywords: positive selection; outside options; laboratory experiments (search for similar items in EconPapers)
JEL-codes: C78 C91 D03 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp9908.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9908

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().