[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/uea/wcbess/17-04.html
   My bibliography  Save this paper

The attraction and compromise effects in bargaining: Experimental evidence

Author

Listed:
  • Fabio Galeotti

    (University of Lyon)

  • Maria Montero

    (University of Nottingham)

  • Anders Poulsen

    (University of East Anglia)

Abstract
The Attraction Effect and Compromise Effect (AE and CE) were introduced for individual choice situations. We define and experimentally investigate the AE and CE for bargaining situations. Our data suggest that the AE and CE are significant in bargaining, when certain conditions, related to focal equilibrium selection criteria based on payoff equality, efficiency, and symmetry, are met.

Suggested Citation

  • Fabio Galeotti & Maria Montero & Anders Poulsen, 2017. "The attraction and compromise effects in bargaining: Experimental evidence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 17-04, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:wcbess:17-04
    as

    Download full text from publisher

    File URL: https://ueaeco.github.io/working-papers/papers/cbess/UEA-CBESS-17-04.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    3. Vincent P. Crawford & Uri Gneezy & Yuval Rottenstreich, 2008. "The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures," American Economic Review, American Economic Association, vol. 98(4), pages 1443-1458, September.
    4. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    5. Simonson, Itamar, 1989. "Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(2), pages 158-174, September.
    6. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    7. , & ,, 2012. "Reason-based choice: a bargaining rationale for the attraction and compromise effects," Theoretical Economics, Econometric Society, vol. 7(1), January.
    8. Ronayne, David & Brown, Gordon D.A., 2016. "Multi-attribute decision by sampling: An account of the attraction, comprimise and similarity effects," The Warwick Economics Research Paper Series (TWERPS) 1124, University of Warwick, Department of Economics.
    9. Özgür Kıbrıs & Murat Sertel, 2007. "Bargaining over a finite set of alternatives," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(3), pages 421-437, April.
    10. Marcel Lichters & Paul Bengart & Marko Sarstedt & Bodo Vogt, 2017. "What really matters in attraction effect research: when choices have economic consequences," Marketing Letters, Springer, vol. 28(1), pages 127-138, March.
    11. Alistair Munro & Danail Popov, 2013. "A portmanteau experiment on the relevance of individual decision anomalies for households," Experimental Economics, Springer;Economic Science Association, vol. 16(3), pages 335-348, September.
    12. Conley, John P. & Wilkie, Simon, 1991. "The bargaining problem without convexity : Extending the egalitarian and Kalai-Smorodinsky solutions," Economics Letters, Elsevier, vol. 36(4), pages 365-369, August.
    13. R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3.
    14. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-518, May.
    15. Ben Greiner, 2015. "Subject pool recruitment procedures: organizing experiments with ORSEE," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 1(1), pages 114-125, July.
    16. Steven J. Brams & D. Marc Kilgour, 2001. "Fallback Bargaining," Group Decision and Negotiation, Springer, vol. 10(4), pages 287-316, July.
    17. Faillo, Marco & Smerilli, Alessandra & Sugden, Robert, 2017. "Bounded best-response and collective-optimality reasoning in coordination games," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 317-335.
    18. Marco Mariotti, 1998. "Nash bargaining theory when the number of alternatives can be finite," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(3), pages 413-421.
    19. Myerson, Roger B., 1989. "Credible negotiation statements and coherent plans," Journal of Economic Theory, Elsevier, vol. 48(1), pages 264-303, June.
    20. de Haan, Thomas & van Veldhuizen, Roel, 2015. "Willpower depletion and framing effects," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 47-61.
    21. Castillo, Geoffrey, 2020. "The attraction effect and its explanations," Games and Economic Behavior, Elsevier, vol. 119(C), pages 123-147.
    22. Hiroki Nishimura & Efe A. Ok & John K.-H. Quah, 2017. "A Comprehensive Approach to Revealed Preference Theory," American Economic Review, American Economic Association, vol. 107(4), pages 1239-1263, April.
    23. Guth, Werner & Huck, Steffen & Muller, Wieland, 2001. "The Relevance of Equal Splits in Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 37(1), pages 161-169, October.
    24. Fabio Galeotti & Maria Montero & Anders Poulsen, 2019. "Efficiency Versus Equality in Bargaining," Journal of the European Economic Association, European Economic Association, vol. 17(6), pages 1941-1970.
    25. Makoto Tanaka & Ryo-ichi Nagahisa, 2002. "An axiomatization of the Kalai-Smorodinsky solution when the feasible sets can be finite," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(4), pages 751-761.
    26. Charness, Gary & Gneezy, Uri & Halladay, Brianna, 2016. "Experimental methods: Pay one or pay all," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 141-150.
    27. Luhan, Wolfgang J. & Poulsen, Anders U. & Roos, Michael W.M., 2017. "Real-time tacit bargaining, payoff focality, and coordination complexity: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 102(C), pages 687-699.
    28. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    29. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-673, June.
    30. Highhouse, Scott, 1996. "Context-Dependent Selection: The Effects of Decoy and Phantom Job Candidates," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(1), pages 68-76, January.
    31. Nicholas Bardsley & Judith Mehta & Chris Starmer & Robert Sugden, 2010. "Explaining Focal Points: Cognitive Hierarchy Theory "versus" Team Reasoning," Economic Journal, Royal Economic Society, vol. 120(543), pages 40-79, March.
    32. Conley, John P. & Wilkie, Simon, 1996. "An Extension of the Nash Bargaining Solution to Nonconvex Problems," Games and Economic Behavior, Elsevier, vol. 13(1), pages 26-38, March.
    33. Tserenjigmid, Gerelt, 2019. "Choosing with the worst in mind: A reference-dependent model," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 631-652.
    34. John Conley & Simon Wilkie, 2012. "The ordinal egalitarian bargaining solution for finite choice sets," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(1), pages 23-42, January.
    35. Wilfred Amaldoss & James R. Bettman & John W. Payne, 2008. "—Biased but Efficient: An Investigation of Coordination Facilitated by Asymmetric Dominance," Marketing Science, INFORMS, vol. 27(5), pages 903-921, 09-10.
    36. Marcel Lichters & Marko Sarstedt & Bodo Vogt, 2015. "On the practical relevance of the attraction effect: A cautionary note and guidelines for context effect experiments," AMS Review, Springer;Academy of Marketing Science, vol. 5(1), pages 1-19, June.
    37. Jonathan P. Beauchamp & Daniel J. Benjamin & Christopher F. Chabris & David I. Laibson, 2015. "Controlling for the Compromise Effect Debiases Estimates of Risk Preference Parameters," NBER Working Papers 21792, National Bureau of Economic Research, Inc.
    38. Thomson, William, 1994. "Cooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284, Elsevier.
    39. Heiner Schumacher & Isabel Ruhmer-Krell & Pia Pinger, 2016. "The Compromise Effect in Action: Lessons from a Restaurant’s Menu," Working Papers id:9065, eSocialSciences.
    40. Lichters, Marcel & Müller, Holger & Sarstedt, Marko & Vogt, Bodo, 2016. "How durable are compromise effects?," Journal of Business Research, Elsevier, vol. 69(10), pages 4056-4064.
    41. Masatlioglu, Yusufcan & Uler, Neslihan, 2013. "Understanding the reference effect," Games and Economic Behavior, Elsevier, vol. 82(C), pages 403-423.
    42. Jens Leth Hougaard & Mich Tvede, 2003. "Nonconvex n-person bargaining: efficient maxmin solutions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 81-95, January.
    43. Efe A. Ok & Pietro Ortoleva & Gil Riella, 2015. "Revealed (P)Reference Theory," American Economic Review, American Economic Association, vol. 105(1), pages 299-321, January.
    44. Herne, Kaisa, 1997. "Decoy alternatives in policy choices: Asymmetric domination and compromise effects," European Journal of Political Economy, Elsevier, vol. 13(3), pages 575-589, September.
    45. Huber, Joel & Payne, John W & Puto, Christopher, 1982. "Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 9(1), pages 90-98, June.
    46. Benjamin Bushong & Matthew Rabin & Joshua Schwartzstein, 2021. "A Model of Relative Thinking," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 162-191.
    47. Huber, Joel & Puto, Christopher, 1983. "Market Boundaries and Product Choice: Illustrating Attraction and Substitution Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(1), pages 31-44, June.
    48. Marcel Lichters & Marko Sarstedt & Bodo Vogt, 2015. "On the practical relevance of the attraction effect: A cautionary note and guidelines for context effect experiments," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 5(1), pages 1-19, June.
    49. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    50. Pinger, Pia & Ruhmer-Krell, Isabel & Schumacher, Heiner, 2016. "The compromise effect in action: Lessons from a restaurant's menu," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 14-34.
    51. Nejat Anbarci, 2006. "Finite Alternating-Move Arbitration Schemes and the Equal Area Solution," Theory and Decision, Springer, vol. 61(1), pages 21-50, August.
    52. Anant, T. C. A. & Mukherji, Badal & Basu, Kaushik, 1990. "Bargaining without convexity : Generalizing the Kalai-Smorodinsky solution," Economics Letters, Elsevier, vol. 33(2), pages 115-119, June.
    53. Ian J. Bateman & Alistair Munro & Gregory L. Poe, 2008. "Decoy Effects in Choice Experiments and Contingent Valuation: Asymmetric Dominance," Land Economics, University of Wisconsin Press, vol. 84(1), pages 115-127.
    54. Emin Karagözoğlu & Martin G. Kocher, 2019. "Bargaining under time pressure from deadlines," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 419-440, June.
    55. Isoni, Andrea & Sugden, Robert & Zheng, Jiwei, 2020. "The pizza night game: Conflict of interest and payoff inequality in tacit bargaining games with focal points," European Economic Review, Elsevier, vol. 127(C).
    56. Botond Koszegi & Adam Szeidl, 2013. "A Model of Focusing in Economic Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 53-104.
    57. Kaisa Herne, 1999. "The Effects of Decoy Gambles on Individual Choice," Experimental Economics, Springer;Economic Science Association, vol. 2(1), pages 31-40, August.
    58. Roth, Alvin E & Murnighan, J Keith, 1982. "The Role of Information in Bargaining: An Experimental Study," Econometrica, Econometric Society, vol. 50(5), pages 1123-1142, September.
    59. Andrea Isoni & Anders Poulsen & Robert Sugden & Kei Tsutsui, 2014. "Efficiency, Equality, and Labeling: An Experimental Investigation of Focal Points in Explicit Bargaining," American Economic Review, American Economic Association, vol. 104(10), pages 3256-3287, October.
    60. Colman, Andrew M. & Pulford, Briony D. & Bolger, Fergus, 2007. "Asymmetric dominance and phantom decoy effects in games," Organizational Behavior and Human Decision Processes, Elsevier, vol. 104(2), pages 193-206, November.
    61. Amos Tversky & Itamar Simonson, 1993. "Context-Dependent Preferences," Management Science, INFORMS, vol. 39(10), pages 1179-1189, October.
    62. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
    63. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Claus‐Jochen Haake & Thorsten Upmann & Papatya Duman, 2023. "Wage bargaining and employment revisited: separability and efficiency in collective bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(2), pages 403-440, April.
    2. Makoto Hagiwara, 2024. "The focal Luce model with status Quo," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(1), pages 107-117, June.
    3. Yuan, Yichao & Xiao, Tiaojun, 2023. "Revelation mechanism and decoy strategy for a supply chain with consumer's perceived substitutability," Omega, Elsevier, vol. 120(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Castillo, Geoffrey, 2020. "The attraction effect and its explanations," Games and Economic Behavior, Elsevier, vol. 119(C), pages 123-147.
    2. Colin F. Camerer & Gideon Nave & Alec Smith, 2019. "Dynamic Unstructured Bargaining with Private Information: Theory, Experiment, and Outcome Prediction via Machine Learning," Management Science, INFORMS, vol. 65(4), pages 1867-1890, April.
    3. Ayala Arad & Benjamin Bachi & Amnon Maltz, 2023. "On the relevance of irrelevant strategies," Experimental Economics, Springer;Economic Science Association, vol. 26(5), pages 1142-1184, November.
    4. Sürücü, Oktay & Djawadi, Behnud Mir & Recker, Sonja, 2019. "The asymmetric dominance effect: Reexamination and extension in risky choice – An experimental study," Journal of Economic Psychology, Elsevier, vol. 73(C), pages 102-122.
    5. Sürücü, Oktay & Brangewitz, Sonja & Mir Djawadi, Behnud, 2017. "Asymmetric dominance effect with multiple decoys for low- and high-variance lotteries," Center for Mathematical Economics Working Papers 574, Center for Mathematical Economics, Bielefeld University.
    6. Fabio Galeotti & Maria Montero & Anders Poulsen, 2019. "Efficiency Versus Equality in Bargaining," Journal of the European Economic Association, European Economic Association, vol. 17(6), pages 1941-1970.
    7. Feltovich, Nick, 2019. "Is earned bargaining power more fully exploited?," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 152-180.
    8. Landry, Peter & Webb, Ryan, 2021. "Pairwise normalization: A neuroeconomic theory of multi-attribute choice," Journal of Economic Theory, Elsevier, vol. 193(C).
    9. Ronayne, David & Brown, Gordon D.A., 2016. "Multi-attribute decision by sampling: An account of the attraction, comprimise and similarity effects," The Warwick Economics Research Paper Series (TWERPS) 1124, University of Warwick, Department of Economics.
    10. Gueye, Mamadou & Quérou, Nicolas & Soubeyran, Raphael, 2020. "Social preferences and coordination: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 26-54.
    11. Fabio Galeotti & Maria Montero & Anders Poulsen, 2015. "Efficiency versus equality in real-time bargaining with communication," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 15-18, School of Economics, University of East Anglia, Norwich, UK..
    12. Schwaninger, Manuel, 2022. "Sharing with the powerless third: Other-regarding preferences in dynamic bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 341-355.
    13. Heydari, Pedram, 2021. "Luce arbitrates: Stochastic resolution of inner conflicts," Games and Economic Behavior, Elsevier, vol. 126(C), pages 33-74.
    14. Navarro, Noemí & Veszteg, Róbert F., 2020. "On the empirical validity of axioms in unstructured bargaining," Games and Economic Behavior, Elsevier, vol. 121(C), pages 117-145.
    15. Kumar Padamwar, Pravesh & Kumar Kalakbandi, Vinay & Dawra, Jagrook, 2023. "Deliberation does not make the attraction effect disappear: The role of induced cognitive reflection," Journal of Business Research, Elsevier, vol. 154(C).
    16. Fischer, Christian & Normann, Hans-Theo, 2019. "Collusion and bargaining in asymmetric Cournot duopoly—An experiment," European Economic Review, Elsevier, vol. 111(C), pages 360-379.
    17. Isoni, Andrea & Poulsen, Anders & Sugden, Robert & Tsutsui, Kei, 2019. "Focal points and payoff information in tacit bargaining," Games and Economic Behavior, Elsevier, vol. 114(C), pages 193-214.
    18. He, Simin & Wu, Jiabin & Zhang, Hanzhe, 2021. "Experimental and Noncooperative Analyses of Decentralized Matching with Transfers," Working Papers 2021-2, Michigan State University, Department of Economics.
    19. Gomez, Yolanda & Martínez-Molés, Víctor & Urbano, Amparo & Vila, Jose, 2016. "The attraction effect in mid-involvement categories: An experimental economics approach," Journal of Business Research, Elsevier, vol. 69(11), pages 5082-5088.
    20. Bett, Zoë & Poulsen, Anders & Poulsen, Odile, 2016. "The focality of dominated compromises in tacit coordination situations: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 29-34.

    More about this item

    Keywords

    bargaining; attraction effect; compromise effect; focality; equality; efficiency; symmetry;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uea:wcbess:17-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cara Liggins (email available below). General contact details of provider: https://edirc.repec.org/data/esueauk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.