CeDEx workshop - Christoph Vanberg (University of Heidelberg)

Legislative bargaining with heterogeneous disagreement values: Theory and experiments

Abstract: We study a version of the Baron-Ferejohn multilateral bargaining game in which failure to pass a proposal in a given round may result in the termination of negotiations (`disagreement'). In case of disagreement, each player receives an exogenous payoff. We investigate the implications of heterogeneity in disagreement values under different q-majority rules. We provide a sufficient condition for immediate agreement in a stationary subgame perfect equilibrium, and characterize equilibrium payoffs and continuation values in such equilibria. Under all q-majority rules, continuation values are (weakly) increasing in disagreement values. Under unanimity rule, equilibrium payoffs are strictly increasing in disagreement values. Under all less-than-unanimity rules, expected payoffs are decreasing or non-monotone in disagreement values, and the player with the largest disagreement value never achieves the highest payoff. We conduct experiments involving three players using majority and unanimity rule, and find qualitative support for these predictions. We also experimentally implement a version of the game in which disagreement values are private information. In this condition, we find significantly more delay under unanimity rule as compared to majority rule. We also find some evidence indicating that players more often vote `no' under unanimity rule, perhaps in order to signal that they have a high breakdown value.