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An outside option experiment

Binmore, Ken G, Shaked, Avner and Sutton, John (1989) An outside option experiment. Quarterly Journal of Economics, 104 (4). pp. 753-770. ISSN 0033-5533

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Abstract

In the economic modeling of bargaining, outside options have often been naively treated by taking them as the disagreement payoffs in an application of the Nash bargaining solution. The paper contrasts this method of predicting outcomes with that obtained from an analysis of optimal strategic behavior in a natural game-theoretic model of the bargaining process. The strategic analysis predicts that the outside options will be irrelevant to the final deal unless a bargainer would then go elsewhere. An experiment is reported which indicates that this prediction performs well in comparison with the conventional predictor.

Item Type: Article
Official URL: http://qje.oxfordjournals.org/
Additional Information: © 1989 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory; Matching Theory
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 27 Apr 2007
URL: http://eprints.lse.ac.uk/1230/

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