The role of strategic uncertainty in games: An experimental study of cheap talk and contracts in the Nash demand game |
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Authors: | Nick Feltovich Joe Swierzbinski |
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Institution: | University of Aberdeen Business School, Edward Wright Building, Aberdeen AB24 3QY, UK |
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Abstract: | We utilise results from a human-subjects experiment to examine the connection between strategic uncertainty and outcomes in games. Our basic game is a Nash demand game where one player has an outside option available. A “chat” treatment allows bargainers to send cheap-talk messages prior to playing the basic game, and in a “contracts” treatment, they can additionally propose and accept binding contracts. We propose that strategic uncertainty comprises at least two facets: “coordination-type”, which is lower in the chat game than in the basic game, and “rationality-type”, which is lower in the contracts game than in the chat game. We find that both types of strategic uncertainty impact bargaining outcomes: moving from the basic game to the chat game, and thence to contracts, improves several aspects of outcomes, such as higher efficiency, less opting out and less under-demanding. Other results include a treatment effect on the types of agreements that are reached. |
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Keywords: | Strategic uncertainty Nash bargaining Unstructured bargaining Outside option Cheap talk Binding agreements Coase theorem |
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