The Effect of Historical Entitlements in Cooperative Bargaining Over Evironment Policy: An Experimental Test

Collaborative policy making has been an increasingly popular method of solving use conflicts on public lands. Representatives of interested groups are authorized to negotiate land use policy in the shadow of a government imposed backstop policy. This process can be modeled using cooperative game theory over multiple goods in an Edgeworth Box framework, and its outcomes predicted using axiomatic bargaining theories (e.g. Pareto efficiency or the Nash bargain). A challenge for collaborative policymaking arises when users’ historical land use entitlements differ from the backstop the government will impose if negotiations fail. A challenge for the predictive power of axiomatic bargaining theory arises when the government’s backstop policy (and the Nash bargain it generates) creates substantial inequality of benefits among users. In this paper, we use laboratory experiments to test the effect on bargaining of 1) the divergence of historical entitlements from the prospective backstop and 2) the divergence of the Nash bargain generated by the backstop policy from the outcome that equalizes benefits. We examine the effects of both types of divergence on agreement rates, and on the likelihood that parties settle inside the bargaining lens, on the contract curve, and at the Nash bargain. We find that divergence of historical entitlements from the backstop significantly changes bargaining outcomes when the historical benefits were equally distributed and the benefits at the backstop and Nash are not. At the same time, historical entitlements do not affect outcomes when they were unequal but the backstop and Nash bargain generate equal benefits. We also find the outcomes parties reach are affected by the divergence of equality from the Nash bargain, independent of historical entitlement.