Loyalty, protocol, bargainer characteristics, and rationality in an experimental investigation of bilateral bargaining in dyads

Abstract

This article analyses data from a bargaining experiment where dyads (i.e. two players) bargain over the chances (in terms of lottery tickets) to win a shrinking monetary reward. The analysis models both time-independent and time-dependent measures of rationality, which are derived from the negotiated distribution of lottery tickets, as a function of bargainers' stated loyalty, individual characteristics, and bargaining protocol. Statistical results suggest that constrained self-interest dominates both measures of rationality, which are significantly affected by pre-bargain cheap talk, first-offer restrictions, loyalty, gender, and academic major.

Acknowledgements

I thank John Gates, Joseph Herriges, Christopher Miller, Jason Shogren, John Stufken, and Stephen Swallow for helpful comments. Any errors remain my own.

Notes

¹In addition, see Shogren (1989) on how loyalty to a group can increase gamesmen behaviour.

²Each protocol was replicated 10 times, which yielded a total sample size of 60 bargaining pairs.

³Ordinary Least Squares (OLS) was used to fit the models; however, since P _c is limited to a range of values from 0 to 1, the analysis also considered a two-limit Tobit model to regress P _c against the independent variables. None of the controllers accepted a P _c = 0 or secured a P _c = 1, so the Tobit results yielded essentially the same parameter estimates and conclusions as the OLS results.

⁴Given Hoffman et al.’s (1994, p. 349) argument that subjects ‘ … may be concerned about appearing greedy and being judged so by the experimenter,’ this study originally hypothesized that a Loyalty_Monitor variable would negatively affect Y. However, since only six out of 120 subjects indicated loyalty towards the monitor, Loyalty_Monitor proved insignificant in all regression analyses, which remains consistent with Frank (1998) who found that subjects are not concerned about the experimenter's welfare.

⁵Sen (1977, p. 326) distinguishes between the two concepts as follows: ‘If the knowledge of torture of others makes you sick, it is a case of sympathy; if it does not make you feel personally worse off, but you think it is wrong and you are ready to do something to stop it, it is a case of commitment.’

⁶The mean of the noncontroller's first round minimum willingness to accept was 42 lottery tickets, and the mean of the controller's second round maximum willingness to offer was 46 lottery tickets.