Bargaining Outcomes as the Result of Coordinated Expectations

Jeffrey Carpenter

Journal of Conflict Resolution, 2003, vol. 47, issue 2, 119-139

Abstract: Experimental studies of two-person sequential bargaining demonstrate that the concept of subgame perfection is not a reliable predictor of actual behavior. Alternative explanations argue that fairness influences outcomes and that bargainer expectations matter and are likely not to be coordinated at the outset. This study examines the process by which bargainers in dyads coordinate their expectations on a bargaining convention and how this convention is supported by the seemingly empty threat of rejecting positive but small subgame perfect offers. To organize the data from this experiment, a Markov model of adaptive expectations and bounded rationality is developed. The model predicts actual behavior quite closely.

Keywords: sequential bargaining; experiment; convention; fairness; finite Markov chain; bounded rationality; learning (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:jocore:v:47:y:2003:i:2:p:119-139

DOI: 10.1177/0022002702251023

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