Focal points intacit bargaining problems: Experimental evidence

ISONI, ANDREA;Poulsen A;Sugden R;Tsutsui K.

2013-01-01

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Abstract

We use a new experimental design to test Schelling's hypotheses about the nature and effectiveness of focal points in tacit bargaining problems. In our design, as in many real-world bargaining problems, each player's strategies are framed as proposals about what part of a stock of valuable objects she is to take, and there are payoff-irrelevant cues which define relations between players and objects. In line with Schelling's hypotheses, we find that such cues serve as powerful focal points. Their presence increases efficiency even in games where there is no efficient and equal division, and induces systematically unequal payoff distributions. (C) 2013 Elsevier B.V. All rights reserved.