Experimental economics summary paper - Essay Example

Your Full Your 15 March Summary The article “Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study.” by Roth, Prasnikar, Okuno-Fujiwara, and Zamir describes the findings of a study conducted at four different locations around the world, about bargaining and market behavior of individuals. They focus was on Jerusalem, Tokyo, Pittsburg and Ljubljana in Israel, Japan, USA and Yugoslavia, respectively. The researchers state that these locations were picked since they were ideal for the experiment and equilibrium-point predictions were available to use as control experiments in gauging accuracy.

The article describes how two variations on similar experiments test consumer behavior of people put in different market-type situations. The first variety of the game takes place between two people who are put in multiple sessions of a staged bargaining situation. They are to divide a sum between themselves and their acceptance or rejection of the proposed division determines what they get. One of them takes the lead and makes the other an offer of division. If the other person accepts the offer, they keep the money according to that division.

On rejection, both participants get nothing. The second variety places a group of up to nine people in a bidding session against a ‘seller’. The seller’s acceptance or rejection of individual offers determines earnings in this case. The ‘buyers’ each make an offer for an object that is of the same monetary value to them and is of no value to the ‘seller’. If the seller accepts the highest offer, he gets the money and the buyer receives the difference between the highest price and the value of the object.

On the seller’s rejection, nobody receives anything. The study concludes that despite market behavior being uniform globally, cultural differences and not geographical reasons such as language and currency are the basis of variation in bargaining behavior. It states that the outcomes in all four locations were totally different from the predictions, in both the instances of acceptances as well as how often they occurred. I found one of the study’s main findings very interesting: that different people’s idea or concept of fairness might be the factor dictating their bargaining behavior.

They may choose or reject offers based upon their perception of how ‘fair’ or how ‘reasonable’ each individual offer is and not what their position is. In the two-player bargaining game, the first-mover was in a better position to get more for him- or herself. Yet how they acted may be attributed not to aggressiveness but to what they took to be a fair offer. I would like to raise one point for discussion here: from my inference of the article, players who were fair most of the time i.e. made 50/50 offers continuously seemed to have gotten less advantage out of the transaction.

The question to be raised here is this, just how much does aggressiveness have to do with the fairness of the deal, or with the advantages obtained. Works Cited Roth, Alvin E., Vesna Prasnikar, Masahiro Okuno-Fujiwara, and Shmuel Zamir. “Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study.” The American Economic Review 81.5 (1991): 1068-1095. Print.