Opting Out: An Experimental Comparison of Bazaars versus High-Tech Markets

Randolph Sloof

Journal of Institutional and Theoretical Economics (JITE), 2005, vol. 161, issue 4, 589-620

Abstract: Theory predicts that in alternating-offer bargaining the threat to delay agreement is effectively empty when the proposer can also opt out after a rejection (high-tech market), while this is not the case when only the responder can do so (bazaar). First proposers therefore have much more bargaining power in the former and get significantly more in equilibrium. This paper reports about an experiment designed to test these predictions. Our results confirm the theoretical predictions once we allow for the observed presence of a significant fraction of inequality-averse types in our subject pool.

JEL-codes: C78 C91 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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