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Cover of: Opting Out: An Experimental Comparison of Bazaars versus High-Tech Markets
Randolph Sloof

Opting Out: An Experimental Comparison of Bazaars versus High-Tech Markets

Section: Articles
Volume 161 (2005) / Issue 4, pp. 589-620 (32)
Published 09.07.2018
DOI 10.1628/093245605775075979
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Summary
Theory predicts that in alternating-offer bargaining the threat to delay agreement is effectively empty when the proposer can also opt out after a rejection (high-tech market), while this is not the case when only the responder can do so (bazaar). First proposers therefore have much more bargaining power in the former and get significantly more in equilibrium. This paper reports about an experiment designed to test these predictions. Our results confirm the theoretical predictions once we allow for the observed presence of a significant fraction of inequality-averse types in our subject pool.