An Experimental Study of Sequential Bargaining

Abstract

In a study of alternating offer bargaining with discounting, perfect equilibrium was found to have little predictive power under the conventional assumption that bargainers' utility is measured by their monetary payoffs. Instead, the authors' data exhibit a first mover advantage, independent of the equilibrium prediction. However the pattern of rejected offers and counterproposals shows bargainers' utility was not measured by their monetary payoffs. The authors also reanalyze data from earlier experiments, finding a similar pattern of rejections and counterproposals. This suggests that uncontrolled nonmonetary components of utility may have played a role in those experiments also, offering a possible explanation for the mutually inconsistent conclusions reached. Copyright 1989 by American Economic Association.