Your Full Name Your Your 15 March 2011 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…
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. ...
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The basic assumption presented in the article is that in the bargaining situation in the Ultimatum Game, the allocators will tend to offer something closer to zero while the recipients will receive something positive offer. Something positive may be uncertain because the article presented some facts that recipients somehow have either rational or irrational reasons (Thaler 202).
The economic point of view specifically states that interest and personal consumption are highly associated, more consumption is preferred than less and current and future consumptions influence behavior (Berg, Dickhaut, & McCabe 122). In line with this assumption, there is a need to challenge existing belief that an individual’s self-interested behavior prevails in the social context of the economic standpoint.
The authors indicated that the game would require a “volunteer” in order to enjoy a stipulated benefit by all participants of the game. Equilibrium properties were used to predict the outcomes of the probabilities of volunteering depending on the size of the group: the Nash predictions that contend that the probability of volunteering decreases as the number of members in a group increases, attributed to a “diffusion of responsibility” (Goeree, et.al, 3); the quantal response equilibrium (QRE) which incorporates the effects of noice factors requiring “choice probabilities to be consistent with beliefs” (ibid, 4); and the inequity aversion that indicates that “a person who volun
The author has tried to analyse the various aspects of experimental economics and the factors that determine the successes or the failures of such experiments. There are some pre-conceived notions when treating humans as subjects to such experiments, that humans are rational while being selfish.
The experiment consisted of 12 experimental sessions. The laboratory design of each experiment question consisted of an auction market with four buyers and sellers. Buyers made money by buying from the sellers and reselling to the experimenter, while sellers made money by buying from the experimenter and reselling to the buyers.
The article describes empirical regularities that have been observed in auction markets of these two items. In the English auction system there is a mechanism known as a reserve price. The reserve price is the minimum price the bidders have to reach for the sale to occur.
Status Quo Bias involves a bias for the present state and not accepting changes. Loss aversion states that the disadvantage in losing an object is considered greater than the advantage of acquiring an object. The research paper explores the relation