Backward induction or forward reasoning? An experiment of stochastic alternating offer bargaining

Arbeitspapier

Bounded rationality questions backward induction, which however, does not exclude such reasoning when anticipation is easy. In our stochastic (alternating offer) bargaining experiment, there is a certain first-period pie and a known finite deadline. What is uncertain (except for the final period) is whether there is a further period. Whereas backward induction requires information about all later pie sizes and probabilities, forward reasoning is expected to consider only the immediate prospects. Rather than relying only on decision data, we try to assess the cognitive approach such as forward reasoning of backward induction by control of information retrieval. We find that participants who begin with the shortest games before playing possibly longer games, initially resort to backward induction before switching to forward-looking behavior.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KIT Working Paper Series in Economics ; No. 42

Classification and Topics

• Classification: Wirtschaft ; Game Theory and Bargaining Theory: General ; Noncooperative Games ; Design of Experiments: Laboratory, Individual
• Subject: backward induction ; forward reasoning ; bargaining ; Verhandlungstheorie ; Stochastischer Prozess ; Beschränkte Rationalität ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berninghaus, Siegfried K. ; Güth, Werner ; Schosser, Stephan
• Event: Veröffentlichung
• (who): Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)
• (where): Karlsruhe
• (when): 2012

Further information

• DOI: doi:10.5445/IR/1000028833
• Handle: http://hdl.handle.net/10419/60195
• URN: urn:nbn:de:swb:90-288331
• Last update: 10.03.2025, 11:43 AM CET