Bargaining and Network Structure: An Experiment

Gary Charness (), Margarida Corominas-Bosch and Guillaume Frechette

No 05-05, University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara

Abstract: We consider bargaining in a bipartite network of buyers and sellers, who can only trade with the limited number of people with whom they are connected. Such networks could arise due to proximity issues or restricted communication flows, as with information transmission of job openings, business opportunities, and transactions not easily regulated by external authorities. We perform an experimental test of a graph-theoretic model that allows us to decompose any two-sided network into simple networks of three types, with unique predictions about equilibrium prices for the networks in our sessions. We begin with two separate simple networks, which are then joined by an additional link. Participants appear to quickly grasp important characteristics of the networks. The results diverge sharply depending on how this connection is made, typically conforming to the theoretical directional predictions. Payoffs can be systematically affected even for agents who are not connected by the new link. We find strong evidence that shares (publicly) allocated in the past to others in one's current position substantially and significantly affect what one is willing to accept.

Keywords: Bargaining; Experiment; Graph Theory; Network; Social Learning (search for similar items in EconPapers)
Date: 2005-04-20
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Related works:
Working Paper: Bargaining and Network Structure: An Experiment (2004)
Journal Article: Bargaining and network structure: An experiment (2007)
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