SFB 303 Discussion Paper No. B-402

Author: Hennig-Schmidt, Heike
Title: Break-offs in Bargaining, Evidence from a Video Experiment
Abstract: In this paper we report on a new methodology of observing subjects behavior in a laboratory situation: Videotaping groups of subjects who have to perform a common task provides information on decision processes that cannot be obtained by another method. We conducted a videotaped bargaining experiment in order to gain information on the emergence of break offs in negotiations. Field studies as well as experiments show that break offs are a nonnegligible phenomenon in bargaining. There is an extended literature on the question whether these findings can be explained within the game theoretic framework assuming individual rational players being guided only by economic or whether one has to assume also noneconomic motivating factors.
Analyzing the transcripts reveals that potential break offs are discussed in all sessions and not only in those ending by a breakdown. Moreover, subjects are guided by economic and noneconomic motivations. In addition to the monetary aspect, concepts are to be considered which have been developed in psychology, i.e. negative reciprocity, and power. Based on these findings we present a motivational explanation of potential and actual break offs showing that emotions, especially anger, cause subjects to re-evaluate the outcome of the game. Excerpts of group discussions (translated into English) in a session ending by break off are to be found in the Appendix.
Keywords:Bargaining experiments, video experiments, break offs, motivation, negative reciprocity, power, emotions
JEL-Classification-Number:C7, C72, C79
Creation-Date: February 1997, revised May 1998
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