The Compromise Game: Two-Sided Adverse Selection in the Laboratory

Juan D. Carrillo and Thomas Palfrey

American Economic Journal: Microeconomics, 2009, vol. 1, issue 1, 151-81

Abstract: We analyze a game of two-sided private information where players have privately known "strengths" and can decide to fight or compromise. If either chooses to fight, the stronger player receives a high payoff and the weaker player receives a low payoff. If both choose to compromise, each player receives an intermediate payoff. The only equilibrium is for players to always fight. In our experiment, we observe frequent compromise, more fighting the lower the compromise payoff and less fighting by first than second movers. We explore several theories of cognitive limitations in an attempt to understand these anomalous findings. (JEL C91, D82)

JEL-codes: C91 D82 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/mic.1.1.151
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: The Compromise Game: Two-Sided Adverse Selection in the Laboratory (2007)
Working Paper: The Compromise Game: Two-sided Adverse Selection in the Laboratory (2007)
Working Paper: The Compromise Game: Two-sided Adverse Selection in the Laboratory (2007)
Working Paper: The compromise game: Two-sided adverse selection in the laboratory (2006)
Working Paper: The Compromise Game: Two-sided Adverse Selection in the Laboratory (2006)
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