## Bargaining with random implementation: an experimental study

### Nejat Anbarci and Nick Feltovich

We use a laboratory experiment to study bargaining in the presence of
*random implementation*. Two players make simultaneous demands;
if compatible, each receives the amount demanded as in the standard
Nash demand game. If bargainers' demands are incompatible, then rather
than bargainers receiving their disagreement payoffs with certainty,
they receive them only with exogenous probability *1-q*. With the
remaining probability *q*, there is random implementation: either
bargainer is equally likely to be chosen to receive his/her demand,
with the remainder going to the other bargainer. The bargaining set is
asymmetric, with one bargainer favoured over the other. We set
disagreement payoffs to zero, and vary *q* over several values
ranging from zero to one.

Our experimental results mostly support the directional predictions of
standard game theory (though the success of its point predictions is
mixed). There is a flavour of conventional arbitration, in that we
observe a strong *chilling effect* on bargaining for values of
*q* near one, with extreme demands and low agreement rates (but
high efficiency) in these treatments. Raising *q* reinforces the
built-in asymmetry of the game, giving the favoured player an
increasingly large share of the payoffs. However, efficiency also rises
with *q*, so that in general, the unfavoured player loses less
than the favoured player gains, and in some cases increasing *q*
leads to Pareto improvements. The effects we find are non-uniform in
*q*: over some fairly large ranges, increases in *q* have
minimal effect on bargaining outcomes, but for other values of *q*,
a small additional increase in *q* leads to sharp changes in results.

Paper (PDF)
Anbarci, Nejat and Nick Feltovich (2012), "Bargaining with random
implementation: an experimental study", *Games and Economic Behavior*
76 (2), pp. 495-514.
DOI:
10.1016/j.geb.2012.07.007.