Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2011:16:
Equal Splits or Product Prices: An Experiment

Håkan J. Holm () and Emma Svensson ()

Abstract: This paper compares the choice of focal points in a Nash Demand Game embedded in an abstract frame with the corresponding choices in a game with a real product frame where parties bargain for a well-known consumer product. We find that the frame has a substantial impact on the fraction of subjects choosing the equal split outcome casting doubt on the robustness of this solution in bargaining over real goods. The paper shows that there is notable heterogeneity among subjects with regard to their choices of focal points and reports individual characteristics predicting these choices.

Keywords: focal points; Nash Demand Game; heterogeneity; framing; equilibrium selection; (follow links to similar papers)

JEL-Codes: C91; D03; D84; (follow links to similar papers)

23 pages, May 2, 2011, Revised April 22, 2013

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