Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioral Types∗

Abstract

We conduct a series of laboratory experiments to understand what role commitment and reputation play in bargaining. The experiments implement the Abreu and Gul (2000) bargaining model that demonstrates how introducing behavioral types, which are obstinate in their demands, creates incentives for all players to build reputations for being hard bargainers. The data are qualitatively consistent with the theory, as subjects mimic induced types. Furthermore, we find evidence for the presence of complementary types, whose initial demands ∗We wish to thank Jim Andreoni, Colin Camerer, John Kagel, Muriel Niederle, Tom Palfrey, Ennio Stacchetti, Leeat Yariv, as well as seminar participants at Caltech, Maastricht University, New York University, Royal Holloway, Universitat Autonòma de Barcelona, Università Bocconi, University of Michigan and University of Texas-Austin, and the ESA Asia-Pacific meetings, ESA North American meetings, the FSU Workshop on Experimental Game Theory, the Stony Brook Game Theory Festival, and the SITE Conference on Experimental Economics for helpful comments and suggestions that improved the paper. We thank Raj Advani and Samuel Mati for software development. Fréchette and Lehrer respectively wish to thank the NSF (grants SES-0519045, SES-0721111, and SES0924780), CV Starr Center, Center for Experimental Social Science (CESS) and SSHRC for research support. We are responsible for all errors.

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@inproceedings{Embrey2012BargainingAR, title={Bargaining and Reputation: An Experiment on Bargaining in the Presence of Behavioral Types∗}, author={Matthew S. Embrey and Guillaume Fr{\'e}chette and Steven F. Lehrer and Muriel Niederle}, year={2012} }