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Commitment and (in) Efficiency: A Bargaining Experiment

Agranov, Marina and Elliott, Matt (2021) Commitment and (in) Efficiency: A Bargaining Experiment. Journal of the European Economic Association, 19 (2). pp. 790-838. ISSN 1542-4766. doi:10.1093/jeea/jvaa012.

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In many matching markets, bargaining determines who matches with whom and on what terms. We experimentally investigate allocative efficiency and how subjects’ payoffs depend on their matching opportunities in such markets. We consider three simple markets. There are no information asymmetries, subjects are patient, and a perfectly equitable outcome is both feasible and efficient. Efficient perfect equilibria of the corresponding bargaining game exist, but are increasingly complicated to sustain across the three markets. Consistent with the predictions of simple (Markov perfect) equilibria, we find considerable mismatch in two of the markets. Mismatch is reduced but remains substantial when we change the nature of bargaining by moving from a structured experimental protocol to permitting free-form negotiations, and when we allow players to renege on their agreements. Our results suggest that mismatch is driven by players correctly anticipating that they might lose their strong bargaining positions, and by players in weak bargaining positions demanding equitable payoffs.

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Additional Information:© The Author(s) 2020. Published by Oxford University Press on behalf of European Economic Association. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (, which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited. We thank Federico Echenique, Edoardo Gallo, Ben Gillen, Ben Golub, Jörg Kalbfuss, Francesco Nava, Emanuel Vespa, Leeat Yariv, and participants in seminars at Berkeley HAAS, Berlin, Bonn, Cologne, Columbia, EUI, Georgetown, NYU, Pittsburgh, Queen Mary, Tel Aviv, UCL, and UCSD for helpful comments and suggestions. Financial support from the European Research Council under the grant EMBED #757229 (Elliott) is gratefully acknowledged.
Funding AgencyGrant Number
European Research Council (ERC)757229
Issue or Number:2
Classification Code:JEL: C78 - Bargaining Theory; Matching Theory; C92 - Laboratory, Group Behavior; D40 - General
Record Number:CaltechAUTHORS:20210607-115057084
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Official Citation:Marina Agranov, Matt Elliott, Commitment and (in) Efficiency: A Bargaining Experiment, Journal of the European Economic Association, Volume 19, Issue 2, April 2021, Pages 790–838,
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:109426
Deposited By: George Porter
Deposited On:10 Jun 2021 21:22
Last Modified:16 Nov 2021 19:36

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