Overestimate yourself or underestimate others? Two sources of bias in bargaining with joint production

Quentin Cavalan, Vincent de Gardelle and Jean-Christophe Vergnaud

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: Although conflicts in bargaining have attracted a lot of attention in the literature, situations in which bargainers have to share the product of their performance have been rarely investigated theoretically and empirically. Here, by decomposing the well-known overplacement effect, we show that two types of biases can lead to conflict in these situations: players might be overconfident in their own production (overconfidence bias) and/or underestimate the production of others (other-underestimation bias). To quantify these biases, we develop a novel experimental setting using a psychophysically controlled production task within a bargaining game. In comparison to Bayesian agents, participants tend to disagree too often, partly because they exhibit both cognitive biases. We test interventions to mitigate these biases, and are able to increase settlements mainly by reducing the other-underestimation bias. Our approach illustrates how combining psychophysical methods and economic analyses could prove helpful to identify the impact of cognitive biases on individuals' behavior

Keywords: overconfidence; bargaining; joint production; belief updating (search for similar items in EconPapers)
JEL-codes: C91 D03 D74 D81 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020-02
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-neu
References: View references in EconPapers View complete reference list from CitEc
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Downloads: (external link)
http://mse.univ-paris1.fr/pub/mse/CES2020/20003.pdf (application/pdf)
https://halshs.archives-ouvertes.fr/halshs-02492289

Related works:
Working Paper: Overestimate yourself or underestimate others? Two sources of bias in bargaining with joint production (2020)
Working Paper: Overestimate yourself or underestimate others? Two sources of bias in bargaining with joint production (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:20003

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