Bounded rationality in laboratory bargaining with asymmetric information

Timothy N. Cason, Stanley S. Reynolds

Research output: Contribution to journalReview article

13 Scopus citations

Abstract

This paper reports an experiment on two-player sequential bargaining with asymmetric information that features some forces present in multi-round monopoly pricing environments. Buyer-seller pairs play a series of bargaining games that last for either one or two rounds of offers. The treatment variable is the probability of continuing into a second round. Equilibrium predictions do a poor job of explaining levels of prices and treatment effects. As an alternative to the conventional equilibrium model, we consider models that allow for bounded rationality of subjects. The quantal response equilibrium model captures some of the important features of the results.

Original languageEnglish (US)
Pages (from-to)553-574
Number of pages22
JournalEconomic Theory
Volume25
Issue number3
DOIs
StatePublished - Apr 1 2005

Keywords

  • Durable goods monopoly
  • Laboratory
  • Logit equilibrium

ASJC Scopus subject areas

  • Economics and Econometrics

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