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 another player.
We next describe how the objects will be divided between matched players. Both players will participate in the automated mechanism that will suggest the division of objects.
Players privately report a number of objects to the mechanism. Assume Player 1 reports a1, and Player 2 reports a2.
If mechanism suggest revising of the submitted numbers, after players submit new numbers, the mechanism recalculates the suggestion using new numbers a1 and a2:
The players observe suggestion from the mechanism. Player 1 observes . Player 2 observes . Player 1 and player 2 simultaneously and independently asked if they accept or reject and , respectively. If at least one rejects, bargaining breaks down.
It means the mechanism tries to settle the claims and split the unclaimed part equally between the players. If players request, in total, more than 100, the mechanism tries one more time with revised numbers. If it is again above 100 it does not provide a recommendation, and bargaining fails.
Note that in case of bargaining breakdown, you will receive the number objects equal to your outside option.
The time for submission of numbers to the mechanism is 60 seconds in each round. The time to accept/reject the mechanism is 30 seconds. Failure to submit on time leads to a payoff zero for the late player and allocation of the outside option to the other player.
Example of how mechanism works:
Player 1 submitted 52 objects to the mechanism. Player 2 submitted 30 objects to the mechanism.
The mechanism suggests 61 objects for player 1 (), the mechanism suggests 39 objects for player 2 ().
The mechanism suggests these divisions to players, who either accept the suggestion or reject it. If at least one player rejects the mechanism's suggestion, the bargaining fails.
Player 1 submitted 62 objects to the mechanism. Player 1 submitted 42 objects to the mechanism.
The sum of submitted numbers is above 100 (62+42=102). Thus, the mechanism suggests to revise submitted number.
Player 1 submitted 60 objects to the mechanism. Player 1 submitted 41 objects to the mechanism.
Mechanism recalculates the suggestions to each player. The sum of submitted numbers is above 100 (60+41=101). Thus, the mechanism suggests bargaining failure.
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 is 45. You submitted 50 objects to the mechanism. The mechanism suggested to you 57 objects. You and your opponent accepted the suggestion. You will earn 57 ECU.
Example 2: Your outside option is 45. You submitted 40 objects to the mechanism. Mechanism suggested to you 42 objects. You and your opponent accepted the suggestion. You will earn 42 ECU.
Example 3: Your outside option is 25. You submitted 55 objects to the mechanism. The mechanism suggested to revise the number. You submitted 53 objects, the mechanism resulted in bargaining failure for objects, so you receive your outside option of 25 objects. You will earn 25 ECU.
Example 4: Your outside option is 70. You submitted 75 objects to the mechanism. The mechanism suggested to revise the number. You submitted 75 objects, the mechanism resulted in bargaining failure. Thus, you receive 70 objects, as it is your outside option, you will earn 70 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 0.05 pounds. Thus, if your earning in the selected round were 64 ECU, your payoff for this task would be: 64 x 0.05 = 3.2 pounds