Invariance failure under subgame perfectness in sequential bargaining

A basic property of any normative theory of decision making --- individual or group --- is its invariance under the theory's own equivalence specification. Growing evidence from experimental studies in several areas of game playing indicates that the game-theoretic notion of strategic equivalence is systematically violated in the behavioral arena. The present study expands the design of previous studies of bilateral bargaining by including a third party and a new trading rule - -- modifications which induce behavioral patterns that reject equivalence under subgame perfectionbargaining, subgame perfect, invariance

An experimental study of buyer-seller negotiation : self-Interest versus other-regarding behavior

This research explores the degree to which self-interest and other-regarding motives direct bargaining behavior in a controlled bargaining experiment. To achieve our goal we study simple bargaining between a buyer and a seller in a scenario that is rich enough to allow for five possible theoretical resolutions that can be ranked by the weight they put on unselfish behavior. Although none of the tested model performed uniformly best, behavioral regularities do emerge which suggest that bargainers are motivated first and formost by individual incentives. Other-regarding behavior is only constraint on the maximization problem. A new parametric model intended to capture the motivational dynamics illustrated by the observed regularities is proposed and its efficacy is assessed. The implications for bargaining and future directions are discussed

Infinite horizon bargaining games : theory and experiments

In this paper we attempt to dismantle the myth that modeling bargaining as an infinite horizon bargaining process is too complex to merit experimentation by providing a simplified approach to the solution of the games underlying this process. In addition, a very rich menu for experimentation with external opportunities and risks is provided. A finite horizon model would be much more cumbersome and artificial. The solution of infinite games is approached through a very natural strategic game form built from the original bargaining tree. A distinguished subset of its Nash equilibria are identified for many cases (met in practice) with subgame perfect solutions of the tree. This approach exposes the fact that infinite horizon reasoning relies on a very weak form of backward induction, as opposed to the complete and lengthy induction necessary for finite games. Although promising, the experimental work we survey provides only weak and equivocal support for rational behavior. The need arises for further abstraction of the bargaining process for a better fit with the phenomena investigated, a procedure recommended by Rubinstein (1991) in the wider context of game theory in practice

A breakdown of invariance : the case of two vs. three-person sequential bargaining

A basis property of any (normative) theory of decision making - individual or group - is its invariance under equivalence. Growing evidence from experimental studies in several areas of game playing indicates that the game-theoretic notion of strategic equivalence is systematically violated in the behavioral arena. The present study expands the design of previous studies of bilateral bargaining by including a third party and a new trading rule - modifications which induce noticeable behavioral anomalies. It is concluded that the equilibrium cannot be the guiding concept in explaining market behavior. We offer several explanations for these regularities in an attempt to lay a foundation for a behavioral game theory of bilateral bargaining