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Commitment and (In)Efficiency: A Bargaining Experiment

Marina Agranov and Matt Elliott

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We conduct an experimental investigation of decentralized bargaining over the terms of trade in matching markets. We study if/when efficient matches are reached, and the terms of trade agreed upon. We find that mismatch is extensive, and persists as we change the nature of bargaining by moving from a structured experimental protocol to permitting free-form negotiations. We identify two sources of inefficiencies. Inefficiencies are driven by (a) players' rational responses to their bargaining positions changing as others reach agreement, and (b) the existence of players who are unwilling to accept low, inequitable payoffs.

New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2017-10-17
Note: mle30
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