Abstract
Strategic Uncertainty in Bargaining - Experimental Evidence
Ben Greiner
In a series of four experiments we demonstrate the existence of significant aversion to strategic
risk in very simple bargaining games which goes far beyond ordinary risk or ambiguity aversion.
Specifically, we find that although almost nobody expects or chooses the rejection of an offered
equal split in a bargaining game, participants behave as if there would be a considerably large
rejection rate for equal splits. This behavior is robust across experimental designs and subject
pools, and can lead to significant inefficiencies in markets. The observations are incompatible
with consistency of strategies and rational beliefs in the sense of Nash equilibrium. In other
words: to explain such behavior, we need to turn to models of bounded rational decision making
with respect to beliefs, such as heuristics or utility models allowing for
non-additive beliefs.