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Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining

Johnson, Eric J. and Camerer, Colin F. and Sen, Sankar and Rymon, Talia (1998) Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining. Social Science Working Paper, 1040. California Institute of Technology , Pasadena, CA. (Unpublished)

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We ran three-round sequential bargaining experiments in which the perfect equilibrium offer was $1.25 and an equal split was $2.50. Subjects offered $2.11 to other subjects, $1.84 to “robot” players (who are known to play subgame perfectly), and $1.22 to robots after instruction in backward induction. Measures of information search showed that subjects did not look at the amounts being divided in different rounds in the correct order, and for the length of time, necessary for backward induction, unless they were specifically instructed. The results suggest that most of the departure from perfect equilibrium is due to limited computation and some is due to fairness.

Item Type:Report or Paper (Working Paper)
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Camerer, Colin F.0000-0003-4049-1871
Additional Information:The financial support of NSF 88-09299 and NSF 90-23531 to the first two authors is gratefully acknowledged. We also thank Rachel Croson, Brian Becker, Barry Blecherman, Gerard Cachon, David Goldstein, Teck-Hua Ho, Keith Weigelt, Ben Wilner, and many colleagues at Penn for their work and ideas. We also have received helpful comments from several referees and seminar participants at many universities including Harvard, Cornell, New York University, Penn State, Rochester, Toronto, Minnesota, MIT, and the International Conference on Game Theory (Florence) and BoWo IV (Bonn). Published as Johnson, E.J., Camerer, C., Sen, S., & Rymon, T. (2002). Detecting failures of backward induction: Monitoring information search in sequential bargaining. Journal of Economic Theory, 104(1), 16-47.
Group:Social Science Working Papers
Funding AgencyGrant Number
Subject Keywords:bargaining, experimental economics, bounded rationality, behavioral economics, behavioral game theory, fairness, limited cognition
Series Name:Social Science Working Paper
Issue or Number:1040
Record Number:CaltechAUTHORS:20170811-144320736
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80310
Deposited By: Jacquelyn Bussone
Deposited On:11 Aug 2017 23:48
Last Modified:03 Oct 2019 18:29

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