Matching and Bargaining with Deadlines: An Experimental Investigation

We describe an experiment where buyers and sellers, endowed with heterogeneous deadlines, are randomly matched and attempt to reach agreement over the division of a fixed surplus. The theoretical models that provide the background for this experiment have been developed in recent papers by Hurkens and Vulkan. Like those papers we consider both the case where deadlines are private and common information –that is, when a trader can or cannot see the deadline of the person she is matched with. Observed behaviour in the experiment is largely consistent with the theory: when the deadline of the responder is known, offers made are increasing in the responder’s deadline while when the deadline of the responder is unknown, offers made are decreasing in the proposer’s deadline. However, in contradiction to the theory, the experimental evidence indicates that individuals reject positive offers and prefer to receive zero payoffs. This supports previous empirical findings of ultimatum game effects in bargaining.