Bargaining with a partially-incentivized agent

William Robert Ingersoll and Alex Roomets

Journal of Economic Behavior & Organization, 2020, vol. 171, issue C, 96-115

Abstract: This paper explores the impact that agent bargaining (when one player represents another party in a bargaining situation for some form of compensation) has on the outcome of negotiations in a three-player setting. We conduct a laboratory experiment simulating a simple unstructured example of agent bargaining with various percentage-based compensation plans. We test hypotheses formulated using a Nash bargaining framework. We also propose novel behavioral explanations for the observed behavior. Our results suggest that compensation percentage has a non-monotonic effect on an agent’s bargaining effectiveness. We find that Nash bargaining does a poor job of explaining our observations, and that using a new solution concept we call the “minimization of differences” solution provides a promising alternative.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:171:y:2020:i:c:p:96-115

DOI: 10.1016/j.jebo.2020.01.018

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