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 two types of objects- A and B. In each round, there are 100 objects A, and 100 objects B. Players bargain how to split these objects.
Each player has an outside option for objects A, which they receive if players do not agree on how to split 100 objects A. At the beginning of each round, the computer randomly chooses each player’s outside option for objects A between 0 and 100, thus, any value between 0 and 100 objects A is equally likely to be an outside option.
The issues are interdependent; thus you can only decide on split of the 100 objects B of you agree on split of the objects A. Note, that if you do not agree on how to split objects A, you will also receive zero objects B. Also, each player has a multiplier for objects B. Multiplier reflects how much a player values objects B relative to objects A. The computer randomly chooses the multiplier for objects B to be either 0.7, 0.8, 0.9, 1, 1.1, 1.2, or 1.3.
You will know own outside option for objects A and multiplier for object B, but not the outside options and multiplier of another player.
The bargaining process will determine how many objects of each type the players receive.
Each player will be able to make offers to the matched player. An offer includes how many objects of each type this player offers to the opponent. The number of objects must lie between 0 and 100. For instance, player 1 offers 45 objects A and 40 objects B. If player 2 accepts it, player 1 receives 55 objects A, and player 2 receives 45 objects A; player 1 receives 60 objects B, and player 2 receives 40 objects B. 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 B from another player, you agree to have 30 objects B, and thus the other player will receive 70 objects B.
Since there are two object types, which are interdependent, you will make offers for the bundles of objects, i.e. {A, B}. An offer will be the number of objects of each type you offer to your opponent. For instance, the offer could be {A-40, B-60}, meaning you offer 40 objects A and 60 objects B. If an offer is accepted, the negotiations end, and the division in the offer is implemented.
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 A and B you agree on and on your outside option for objects A and the multiplier for objects B.
Earnings (in ECU) = Number of objects A + Multiplier x Number of objects B
Example 1: Your outside option for type A is 45, and your multiplier for type B is 1.1. You made an offer to your opponent of 43 objects A (thus, you keep 57) and 70 of objects B (thus, you keep 30), and the offer was accepted. You will earn 57 ECU + 1.1 x 30 ECU = 90 ECU.
Example 2: Your outside option for type A is 45, and your multiplier for type B is 1.1. You accepted an offer {A-42, B-60} from your opponent, thus you receive 42 of objects A, and 60 of objects B. You will earn 42 ECU + 1.1 x 60 ECU = 108 ECU.
Example 3: Your outside option for type A is 25, and your multiplier for type B is 0.7. You made multiple offers but none were accepted, and the process stopped due to a bargaining breakdown at a random time. Thus, you receive 25 of objects A and 0 objects B, as it is your outside option. You will earn 25 ECU + 0.7 x 0 ECU = 25 ECU.
Example 4: Your outside option for type A is 70, and your multiplier for type B is 0.8. You made multiple offers, but none were accepted, nor did you accept any offers from your opponent before you decided to stop negotiations. Thus, you receive 70 objects A and 0 objects B, as it is your outside option. You will earn 70 ECU + 0.8 x 0 ECU = 70 ECU.
At the end of the experiment, we will randomly select one out of 20 rounds. For each ECU of the selected round, you will get 0.03 pounds. Thus, if your earning in the selected round were 96 ECU, your payoff for this task would be: 96 x 0.03 = 2.88 pounds