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.
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 both types of objects.
Players privately report a number of objects A to the mechanism. Assume Player 1 reports a1, and Player 2 reports a2.
The mechanism uses the following procedure determines the recommendation:
If mechanism suggest revising of the submitted numbers, after players submit new numbers, the mechanism recalculates the suggestion using new numbers a1 and a2:
It means the mechanism tries to settle the claims in issue A. 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. If less, the settlement can be reached, and the mechanism rewards those players who ask for fewer objects A by giving more objects B.
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.
Note that in case of bargaining breakdown, you will receive the number of A objects equal to your outside option and zero B objects.
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 A. Player 2 submitted 30 objects A to the mechanism. The mechanism suggests 52 of objects A and 48 of objects B for player 1. The mechanism suggests 48 of objects A and 52 of objects B for player 2.
Player 1 submitted 62 objects A. Player 1 submitted 42 objects A to the mechanism. The sum of submitted numbers is above 100 (62+42=104). Thus, the mechanism suggests to revise the numbers.
Player 1 submitted 60 objects A. Player 1 submitted 41 objects A to the mechanism. Mechanism calculates the suggestions to each player. The sum of submitted numbers is above 100 (60+41=101). Thus, the mechanism suggests bargaining failure, and the players receive their outside options of objects A and zero objects B.
Player 1 submitted 32 objects A. Player 1 submitted 40 objects A to the mechanism. The mechanism suggests 50 of objects A and 50 of objects B for player 1. The mechanism suggests 50 of objects A and 50 of objects B for player 1.
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 objects A is 45, and your multiplier for objects B is 1.1. You submitted 57 objects A to the mechanism. The mechanism suggested to you 57 objects A and 43 objects B. You and your opponent accepted the suggestion. You will earn 57 ECU + 1.1 x 43 ECU = 104.3 ECU.
Example 2: Your outside option for type A is 45, and your multiplier for type B is 1.1. You submitted 37 objects A to the mechanism. Mechanism suggested to you 40 objects A and 60 objects B. You and your opponent accepted the suggestion. You will earn 40 ECU + 1.1 x 60 ECU = 106 ECU.
Example 3: Your outside option for type A is 25, and your multiplier for type B is 0.7. You submitted 55 objects A to the mechanism. The mechanism suggested to revise the numbers. You submitted 53 objects A to the mechanism. The mechanism resulted in bargaining failure. You will earn 25 ECU + 0 ECU = 25 ECU.
Example 4: Your outside option for type A is 70, and your multiplier for type B is 0.8. You submitted 75 objects A to the mechanism. The mechanism suggested to revise the numbers. You submitted 75 objects A to the mechanism. The mechanism resulted in bargaining failure. You will earn 70 ECU + 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