Discounting in finite-time bargaining experiments

Tom-Reiel Heggedal and Thomas McKay (thomas.mckay.econ@gmail.com)
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Tom-Reiel Heggedal: BI Norwegian Business School
Thomas McKay: BI Norwegian Business School

Journal of the Economic Science Association, 2024, vol. 10, issue 2, No 19, 504-518

Abstract: Abstract This paper examines the impact of different ways of inducing discounting in alternating-offer bargaining games in the lab. We examine this by following the framework of Ochs and Roth (Am Econ Rev, pp. 355–384, 1989) and test whether the model’s predictions find support in data under three different discounting implementations; the shrinking-pie procedure, the effective-discounting procedure and the bargaining-delay procedure. We find no sensitivity to the number of periods in any of the three procedures. However, we find mixed evidence for the effect of changing the discount factor in the effective-discounting procedure and the shrinking-pie procedure, but the magnitude of effects are small. Furthermore, there was more disagreement in both the effective-discounting and bargaining-delay procedures than in the shrinking-pie procedure.

Keywords: Alternate-offer bargaining; Laboratory experiment; Discounting; Internet experiment (search for similar items in EconPapers)
JEL-codes: C78 C91 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40881-024-00174-6

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