skip to content

Faculty of Economics

Journal Cover

Agranov, M. and Elliott, M.

Commitment and (in) Efficiency: A Bargaining Experiment

Journal of the European Economic Association

no. jvaa012 (2020)

Abstract: In many matching markets, bargaining determines who matches with whom and on what terms. We experimentally investigate allocative efficiency and how subjects’ payoffs depend on their matching opportunities in such markets. We consider three simple markets. There are no information asymmetries, subjects are patient, and a perfectly equitable outcome is both feasible and efficient. Efficient perfect equilibria of the corresponding bargaining game exist, but are increasingly complicated to sustain across the three markets. Consistent with the predictions of simple (Markov perfect) equilibria, we find considerable mismatch in two of the markets. Mismatch is reduced but remains substantial when we change the nature of bargaining by moving from a structured experimental protocol to permitting free-form negotiations, and when we allow players to renege on their agreements. Our results suggest that mismatch is driven by players correctly anticipating that they might lose their strong bargaining positions, and by players in weak bargaining positions demanding equitable payoffs.

Keywords: Bargaining Theory, Matching Theory, Laboratory, Group Behavior

JEL Codes: C78, C92, D40

Author links: Matthew Elliott  

Publisher's Link:

Cambridge Working Paper in Economics Version of Paper: Commitment and (In)Efficiency: A Bargaining Experiment, Agranov, M. and Elliott, M., (2017)

Papers and Publications

Recent Publications

Jochmans, K. and Weidner, M. Fixed-Effect Regressions on Network Data Econometrica [2019]

Bhattacharya, D. The Empirical Content of Binary Choice Models Econometrica [2020]

Chen, C. Y.-H., Klochkov, Y. and Härdle, W. K. SONIC: SOcial Network analysis with Influencers and Communities Journal of Econometrics, forthcoming [2021]

Aidt, T. S., Asatryan, Z., Badalyan, L. and Heinemann, F. Vote Buying or (Political) Business (Cycles) as Usual? Review of Economics and Statistics [2020]