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Power Asymmetry and Escalation in Bargaining

Ulrike Vollstädt (ulrike.vollstaedt@uni-jena.de)
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Ulrike Vollstädt: International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World, University of Jena

No 2011-054, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Bargaining is prevalent in economic interactions. Under complete information, game theory predicts efficient bargaining outcomes (immediate acceptance of first offer) (see Rubinstein, 1982). However, continuous rejections of offers leading to inefficient delays (escalation) have regularly been found in previous bargaining experiments even under complete information (see Roth, 1995). I test experimentally (1) whether power asymmetry leads to more escalation in bargaining and (2) whether perspective-taking reduces escalation. I find that power asymmetry increases escalation, but that perspective-taking does not reduce escalation.

Keywords: two-person bargaining experiment; asymmetric power; escalation; perspective-taking (search for similar items in EconPapers)
JEL-codes: C78 D89 (search for similar items in EconPapers)
Date: 2011-11-07
New Economics Papers: this item is included in nep-exp and nep-gth
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