Chapter 62 Asymmetric Two-person Bargaining Under Incomplete Information: Strategic Play and Adaptive Learning

This chapter focuses on a series of experiments investigating decision behavior in single-stage, two-person bargaining over the exchange of a single commodity, where neither trader knows with precision the reservation value that the other places on the good or service being bought or sold. Uncertainty about the other trader's reservation value is represented by a commonly known probability distribution. This chapter also summarizes the major behavioral regularities that have been observed in two computer-controlled bargaining experiments using the sealed-bid double auction mechanism. Under this mechanism, the buyer submits a bid anonymously over a computer network, and the seller submits an offer for the good she possesses. Bids and offers are submitted simultaneously. Considerable theoretical progress has been made in analyzing these bilateral bargaining situations with two-sided incomplete information within the general framework of the BayesianNash equilibrium.