Learning in a multilateral bargaining experiment

This paper analyzes data from an investigation of a majoritarian bargaining experiment. A learning model is proposed to account for the evolution of play in this experiment. It is also suggested that an adjustment must be made to account for the panel structure of the data. Such adjustments have been used in other fields and are known to be important as unadjusted standard errors may be severely biased downward. These results indicate that this adjustment also has an important effect in this application. Furthermore, an efficient estimator that takes into account heterogeneity across players is proposed. A unique learning model to account for the paths of play under two different amendment rules cannot be rejected with the standard estimator with adjusted standard errors, however it can be rejected using the efficient estimator. The data and the estimated learning model suggest that after proposing "fair" divisions, subjects adapt and their proposals change rapidly in the treatment where uneven proposals are almost always accepted. Their beliefs in the estimated learning model are influenced by more than just the most recent outcomes. (C) 2009 Elsevier B.V. All rights reserved.