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Information, Uncertainty, and Subjective Entitlements in Bargaining

Emin Karagözoğlu () and Arno Riedl

No 5079, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: More often than not production processes are the joint endeavor of people having different abilities and productivities. Such production processes and the associated surplus production are often not fully transparent in the sense that the relative contributions of involved agents are blurred; either by lack of information about the actual performance of collaborators or because of random noise in the production process or both. These variables likely influence the surplus sharing negotiations following the production. By means of a laboratory experiment, we systematically investigate their role for the whole bargaining process from opening offers to (dis)agreements and find that uncertainties in surplus production and (even) a very coarse performance information lead to bargaining asymmetries. In addition, we find that bargainers' subjective entitlements are also influenced by performance information and the randomness inherent in the production process. These differences in subjective entitlements together with the differences in entitlements between better and worse performers influence the whole bargaining process and significantly contribute to the differences in bargaining outcomes.

Keywords: randomness in production process; performance information; bargaining; entitlements; experiments (search for similar items in EconPapers)
JEL-codes: C79 C92 D01 D29 D63 D89 M59 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2010-07
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Working Paper: Information, Uncertainty, and Subjective Entitlements in Bargaining (2010) Downloads
Working Paper: Information, Uncertainty, and Subjective Entitlements in Bargaining (2010) Downloads
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