Commitment in sequential bargaining - An experiment

Abstract

Schelling (1956) first clarified how power to reduce one’s freedom of choice might benefit a bargaining party. A commitment to reject proposals, when successful, may force concessions from opponents who otherwise might have an upper hand. This paper experimentally studies credible commitments prior to a sequential ultimatum bargaining game. We find that pre-emptive commitment strategies are exploited by responders, but less than predicted by theory. In a game where a responder can unilaterally precommit, she faces the same incentives as a proposer in an ultimatum game. Yet, observed responder commitments are less aggressive than proposals by proposers in the ultimatum game. In a simultaneous commitment game, proposers who cannot benefit from committing are nevertheless observed to commit. The observed within-treatment payoff-differences between the two parties do not comply with the theoretical predictions in the commitment variants of the game. Surprisingly in late rounds, allowing for pre-commitment yields almost 100 % efficiency while the standard ultimatum game continues to feature significant inefficiencies. We discuss four complementary behavioral explanations and find that reciprocity and concern for equality of opportunity are consistent with the observed patterns. Empirically, we observe that ethical criteria underlying preferences for equal opportunity are at work.