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Title: A breakdown of invariance : the case of two vs. three-person sequential bargaining
Authors: Zwick, Rami
Rapoport, Amnon
Weg, Eythan
Keywords: Third party
Market behavior
Behavioral game theory
Bilateral bargaining
Issue Date: May-1996
Series/Report no.: Marketing Working Paper Series ; MKTG 96.070
Abstract: A basis property of any (normative) theory of decision making - individual or group - is its invariance under equivalence. Growing evidence from experimental studies in several areas of game playing indicates that the game-theoretic notion of strategic equivalence is systematically violated in the behavioral arena. The present study expands the design of previous studies of bilateral bargaining by including a third party and a new trading rule - modifications which induce noticeable behavioral anomalies. It is concluded that the equilibrium cannot be the guiding concept in explaining market behavior. We offer several explanations for these regularities in an attempt to lay a foundation for a behavioral game theory of bilateral bargaining.
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