We will start the experiment when 10 participants login. You will play 10 rounds of a decision situation. At the start of each round, we will match you with another participant. Hence, the person you are matched with will typically change between rounds.
In each round, there are 100 objects. Players bargain how to split these objects.
Each player has an outside option, i.e. the number of objects they receive if players do not agree on how to split 100 objects. At the beginning of each round, the computer randomly chooses each player’s outside option between 0 and 100, thus any value between 0 and 100 objects is equally likely to be an outside option. You will know your outside option for each round, but not the outside option of the other player.
The bargaining process will determine how many objects that you will receive.
Each player will be able to make offers to the opponent. An offer includes how many objects this player offers to the opponent. The number of objects must lie between 0 and 100 and be a whole number. For instance, player 1 offers 45 objects. If player 2 accepts it, player 1 receives 55 objects, and player 2 receives 45 objects. Thus, when making offers, it is essential to remember that you offer this amount to the opponent. When you observe an offer, it means your opponent offers the amount in the offer to you, i.e., by accepting an offer of 30 objects from the other player, you agree to have 30 objects, and thus the other player will receive 70 objects.
You can make up to 2 simultaneous offers, i.e. you can have up to 2 active offers. You can revise an offer by making a new offer. You can also cancel an offer, in which case this offer will be removed from your standing offers.
You will also decide whether you would like to accept or reject the offers made by the other player. If an offer is accepted, you will receive the amount mentioned in the offer, and your opponent will receive the 100 minus the amount mentioned in the offer. Accepted offers cannot be canceled.
Here are three ways the bargaining process can end.
Your earnings and those of other players will depend on the number of objects you agree on and your outside option.
Earnings (in ECU) = Number of objects
Example 1: Your outside option is 45. You made an offer to your opponent of 43 objects (thus, you keep 57), and the offer was accepted. You will earn 57 ECU.
Example 2: Your outside option is 45. You accepted an offer to receive 42 objects. You will earn 42 ECU.
Example 3: Your outside option is 25. You made multiple offers for objects, but none were accepted, and the process stopped due to a bargaining breakdown at a random time. You will earn 25 ECU.
Example 4: Your outside option is 70. You made multiple offers for objects but none were accepted, nor did you accept any offers from your opponent before both decided to stop negotiations. You will earn 70 ECU.
At the end of the experiment, we will randomly select one out of 10 rounds. For each ECU of the selected round, you will get 0.05 pounds. Thus, if your earning in the selected round were 68 ECU, your payoff for this task would be: 68 x 0.05 = 3.4 pounds.