Focal Points in Experimental Bargaining Games

Isoni, Andrea, Sugden, Robert and Zheng, Jiwei (2022) Focal Points in Experimental Bargaining Games. In: Bargaining. Palgrave Macmillan, 109–130. ISBN 978-3-030-76665-8

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Abstract

This paper is a review of experiments that have investigated the role of focal point reasoning in bargaining games. The concept of a focal point derives from Schelling’s 1960 book The Strategy of Conflict. Schelling hypothesises that in bargaining games, rational players will often be able to reach an agreement, even without communication, by using their shared knowledge of ‘incidental details’ of the relevant game. Even if these details discriminate against one player, the mutual expectation of the resulting agreement would leave that player with no choice but to submit to it. A focal point is an equilibrium that is selected through such a process of ‘meeting of minds’ based on commonly known cues that discriminate between the available equilibria. We distinguish between payoff-based focal points (based on properties of equilibrium payoffs, such as equality and efficiency) and label-based focal points (based on ‘incidental’ properties of players or strategies). We see the essence of Schelling’s intuition to be the players’ recognition that conflicts of interest should be set aside in the search for a discriminating cue. In this respect, label-based focal points are better suited to identify pure focal-point reasoning. The experimental evidence suggests that label-based cues can have a significant effect on the outcomes of bargaining games, but conflicts of interest have a stronger tendency to inhibit this effect than Schelling hypothesised.

Item Type:	Book Section
Uncontrolled Keywords:	focal point,bargaining,experiment,economics, econometrics and finance(all) ,/dk/atira/pure/subjectarea/asjc/2000
Faculty \ School:	Faculty of Social Sciences > School of Economics
UEA Research Groups:	Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences Faculty of Social Sciences > Research Groups > Behavioural Economics Faculty of Social Sciences > Research Groups > Economic Theory Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User:	LivePure Connector
Date Deposited:	22 Jul 2020 03:28
Last Modified:	19 Apr 2024 01:38
URI:	https://ueaeprints.uea.ac.uk/id/eprint/76233
DOI:	10.1007/978-3-030-76666-5_6

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