Two Person Bargaining Mechanisms: A Laboratory Experiment

Abstract

We conduct a series of experiments in which two subjects bargain over five alternatives. Following an experimental design closely related to ?, we evaluate the performance of three bargaining mechanisms: (i) one subject shortlists a bloc of three alternatives before the other chooses one among them, (ii) both subjects veto alternatives simultaneously and in a bloc, and (iii) both subjects veto alternatives simultaneously and gradually one after the other. Our data show the following: The non-symmetric shortlisting mechanism (i) is highly efficient but exhibits an important first-mover advantage. The simultaneous mechanism (ii) is less efficient than (i) and generates high ex post inequality. The gradual veto mechanism (iii) is no less efficient than (i), but has the important advantage of shutting down the possibility of any first-mover advantage.

An Experiment on Two-Person Social Choice

“…They argue that fairness concerns seem to affect the behavior of some participants, whose decisions may be reconciled with a theory of intentions-based reciprocity. With a similar experimental design, Bol, Laslier, and Núñez (2022) evaluate the performance of three bargaining mechanisms: Shortlisting Mechanism, The simultaneous mechanism, where each player simultaneously vetoes two options out of the five available ones, and the outcome is a uniform lottery over non-vetoed options and Gradual Veto mechanism, where at each step and simultaneously, each subject vetoes one option. While comparing the mechanism, they look at the sum of subjects' monetary payoffs (called efficiency in this context), inequality, first mover advantage, and rates of reaching Pareto Optimal & Fallback Bargaining alternatives.…”

“…From the equilibrium characterizations of Barberà and Coelho (2022) and Bol, Laslier, and Núñez (2022), we identified the equilibrium outcomes for Pf 1, Pf 2, and Pf 3. We did not analyze equilibrium strategies separately since thick best responses and multiple steps make it harder to comment on whether the participants follow equilibrium strategies.…”

“…The fallback bargaining Test (FB) gives the highest possible level of utility to the worse-off subject. Bol, Laslier, and Núñez (2022). In this context, the alternatives with the highest rank for the worst-off players are the Fallback Bargaining alternatives.…”

“…Instead of looking at Pareto Optimal alternatives, Bol, Laslier, and Núñez (2022) defines efficiency as the summation of the payoffs. Similarly, looking at the average payoff might be a good idea to capture the total welfare.…”