Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

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

Håkan J. Holm () and Emma Svensson ()
Additional contact information
Håkan J. Holm: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Emma Svensson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

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

JEL-codes: C91; D03; D84

23 pages, First version: May 2, 2011. Revised: April 22, 2013. Earlier revisions: April 22, 2013.

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