2024
DOI: 10.1111/sjoe.12552
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Reference points in sequential bargaining: theory and experiment

Kjell Arne Brekke,
Alice Ciccone,
Tom‐Reiel Heggedal
et al.

Abstract: We introduce loss aversion in an infinite‐horizon, alternating‐offers model. When outside options serve as reference points, the equilibrium of our model follows that of the standard Rubinstein bargaining model, i.e., outside options do not affect the equilibrium unless they are binding. However, when reference points are given by the resources players contribute to the pie, the bargaining outcome changes such that a player's share increases in her contribution. We test our model's predictions in the laborator… Show more

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