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On the influence of hard leverage in a soft leverage bargaining game: The importance of credible claims

Gary E. Bolton and Emin Karagözoğlu ()

Games and Economic Behavior, 2016, vol. 99, issue C, 164-179

Abstract: What makes a bargaining proposal credible? We study how hard leverage (binding commitment) influences soft leverage (appealing to a focal point) in a rich-context bargaining game known to exhibit competing claims to focality. In three treatments, our experiment varies one bargainer's ability to commit, holding the soft leverage condition fixed. As in previous studies, we observe that opening offers are consistent with the available soft leverage. The influence of hard leverage is most evident in the concessionary stage. Hard and soft leverage interact to influence outcomes: Hard leverage advantages its holder, yet settlements largely stay between the two focal points. We posit that focal points induce mutual expectations of bargainer social preferences that, when combined with the Nash bargaining solution, imply the comparative statics concerning the settlements observed. A similarly modified version of the Zeuthen–Harsanyi model of the bargaining process, agrees with the comparative statics on opening offers and concessions.

Keywords: Bargaining; Credibility; Experiments; Hard leverage; Soft leverage (search for similar items in EconPapers)
JEL-codes: C91 D33 D63 (search for similar items in EconPapers)
Date: 2016
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