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Faculty of Economics

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Agranov, M. and Elliott, M.

Commitment and (In)Efficiency: A Bargaining Experiment


Abstract: We conduct an experimental investigation of decentralized bargaining over the terms of trade in matching markets. We study if/when efficient matches are reached, and the terms of trade agreed upon. We find that mismatch is extensive, and persists as we change the nature of bargaining by moving from a structured experimental protocol to permitting free-form negotiations. We identify two sources of inefficiencies. Inefficiencies are driven by (a) players' rational responses to their bargaining positions changing as others reach agreement, and (b) the existence of players who are unwilling to accept low, inequitable payoffs.

Author links: Matthew Elliott  


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