What Price Compromise?

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Publication details

JournalTHEORY AND DECISION
DateE-pub ahead of print - 19 Aug 2014
DatePublished (current) - Oct 2014
Issue number3
Volume77
Number of pages8
Pages (from-to)359-376
Early online date19/08/14
Original languageEnglish

Abstract

This paper identifies, and tests experimentally, a prediction of the Nash bargaining axioms that may appear counterintuitive. The context is a simple bargaining problem in which two players have to agree a choice from three alternatives. One alternative favours one player and a second favours the other. The third is an apparently reasonable compromise, but is in fact precluded as an agreed choice by the Nash axioms. Experimental results show that agreement on this third alternative occurs rather often. Our subjects’ behaviour could be interpreted as the paying of an irrationally high price, according to the Nash axioms, in order to reach a compromise agreement.

    Research areas

  • Bargaining, Compromise, Experiments, Nash axioms

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