The Attraction and Compromise Effects in Bargaining: Experimental Evidence

Galeotti, Fabio; Montero, Maria; Poulsen, Anders

Abstract

We experimentally investigate, in an unstructured bargaining environment with commonly known money payoffs, the attraction effect and compromise effect (AE and CE) in bargaining, namely, a tendency for bargainers to agree to an intermediate option (CE) or to an option that dominates another option (AE). We conjecture that the relevance of the AE and CE in bargaining is constrained by how focal the feasible agreements’ payoffs are. We indeed observe that there are significant AEs and CEs, but these effects are mediated by the efficiency and equality properties of the feasible agreements. Due to the allure of equality, the effects are harder to observe when an equal earnings contract is available. Decoys are more effective in shifting agreements from a very unequal contract to a less unequal one rather than the reverse.

Citation

Galeotti, F., Montero, M., & Poulsen, A. (2022). The Attraction and Compromise Effects in Bargaining: Experimental Evidence. Management Science, 68(4), 2377-3174. https://doi.org/10.1287/mnsc.2021.4025

• Journal Article Type: Article
• Acceptance Date: Jan 26, 2021
• Online Publication Date: Jul 9, 2021
• Publication Date: 2022-04
• Deposit Date: Apr 13, 2021
• Publicly Available Date: Jul 9, 2021
• Journal: Management Science
• Print ISSN: 0025-1909
• Electronic ISSN: 1526-5501
• Publisher: INFORMS
• Peer Reviewed: Peer Reviewed
• Volume: 68
• Issue: 4
• Pages: 2377-3174
• DOI: https://doi.org/10.1287/mnsc.2021.4025
• Keywords: Bargaining • attraction effect • compromise effect • focality • equality • efficiency
• Public URL: https://nottingham-repository.worktribe.com/output/5464076
• Publisher URL: https://pubsonline.informs.org/doi/10.1287/mnsc.2021.4025