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Bargaining and Anchoring 16-01-2017
Last registered on January 16, 2017

Pre-Trial

Trial Information
General Information
Title
Bargaining and Anchoring 16-01-2017
RCT ID
AEARCTR-0001920
Initial registration date
January 16, 2017
Last updated
January 16, 2017 11:09 AM EST
Location(s)
Region
Primary Investigator
Affiliation
NHH Norwegian School of Economics
Other Primary Investigator(s)
Additional Trial Information
Status
On going
Start date
2017-01-16
End date
2017-01-20
Secondary IDs
Abstract
One of the most famous and often replicated findings from psychology and behavioral economics is the anchoring effect. People believed to be using an 'anchor and adjust' heuristic are prone to be influenced by a random numerical cue when trying to make an estimate of some entity (Tversky and Kahneman, 1974, Ariely et al., 2003, Furnham and Boo, 2011). The anchoring effect could be of economic significance for example if consumers are influenced by price cues (like when companies show the previous price they discounted from in many adverts). Another example could be bargaining situations where one of the parties comes with quite an extreme opening proposal in order to possibly anchor another party into shifting their idea about what is a 'reasonable' outcome.

What both these two examples have in common however is that they reason from situations where the s anchor is itself set by an interested and strategic party. This, whereass the anchoring effect has mostly been demonstrated in situations where the anchor was clearly a random number, thus originating from a nonstrategic source. There has been an early study into the effect of the size of opening bids on the subsequent outcome of a negotiation (Galinsky and Mussweiler, 2001). The researchers found an anchoring effect and their interpretation was indeed that there could be an a 'strategic anchoring' effect at work here. However attributing an opening bid effect to the anchoring and adjust heuristic is not straightforward here. There are a number of diferent channels through which opening bids could affect a negotiation outcome. Firsly high opening bid could signal to the negotiation partner that you are a 'tough' bargainer, clearly not afraid to make a 'bold' demand and risk a non-agreement outcome. Secondly, stating a high opening bid could create a 'mental' commitment for the party making the opening bid. Now that the high 'share of the cake'ambition is spoken out, it would feel like a loss to concede too much compared to this first demand, making the party again more likely to opt out from a deal that would be too far away from the opening bid. Thirdly a high opening bid could indeed act like an anchor to the other barainingparty.

We propose here to circumvent these issues and run a bargaining experiment where we can isolate the effect of the type of source of an anchor on the size of the anchoring effect. Our experiment will provide a number of insigths. We will shed light on wether a psychological effect as the anchoring effect works in a strategic setting such as a negotation. And we tackle the question of wether people are differently affected by anchors coming from a neutral, random source, or is set by a strategic and interested source.
External Link(s)
Registration Citation
Citation
de Haan, Thomas. 2017. "Bargaining and Anchoring 16-01-2017." AEA RCT Registry. January 16. https://doi.org/10.1257/rct.1920-1.0.
Former Citation
de Haan, Thomas. 2017. "Bargaining and Anchoring 16-01-2017." AEA RCT Registry. January 16. https://www.socialscienceregistry.org/trials/1920/history/13153.
Experimental Details
Interventions
Intervention(s)
A laboratory experiment testing the anchor and adjust effect in the context of an ultimatum bargaining experiment.
Intervention Start Date
2017-01-16
Intervention End Date
2017-01-20
Primary Outcomes
Primary Outcomes (end points)
We want to see how bargaining proposal amounts and agreements depend on the value of an 'anchor' number. We manipulate the source of the anchor and look if this makes a difference.
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
In the experiments participants will be matched in groups of 3, getting assigned the roles of either participant A, participant B or participant C. There will be 4 treaments named 'baseline', 'random anchor', 'strategic anchor' and 'signaling anchor'. In all treatments an amount Y is to be distributed among the 3 group members in case of eventual negotiation agreement. In case of disagreement, 0 points will be distributed (There will be a showup-fee on top of the points redistributed in the game in the experiment).

Treatments

In the 'baseline treatment', participant A must choose a value X\in\left[0,Y\right]. Subsequently the value of 'proposal' X will be communicated to participant B. Participant B choses a highest acceptable offer. If X is higher than the highest acceptable offer the offer is rejected, otherwise it is accepted. If B accepts the offer the payoffs for participants A,B and C will respectively be X,\frac{Y-X}{2},\frac{Y-X}{2}. There is no communication allowed between the three participants and participant C, although affected by the choices of A and B, will make no active decisions.

In the 'random anchor' treatment all procedures are similar to the baseline except for one detail. Before participant A makes her decision on the value of X, a computer first draws a random integer number R from a uniform distribution ranging from 0 to Y. Participant A is shown the random number R and is asked wether she is planning to choose X to be larger (or equal) or smaller than R. After answering this question participant A continues as in the baseline by choosing X. Neither the random number R, nor the question response by participant A will be communicated to participants B and C and this is common knowledge. Subsequently the value of 'proposal' X will be communicated to participant B, who rejects or accepts based on his/her highest acceptable offer. If B accepts the offer the payoffs for participants A,B and C will respectively be X,\frac{Y-X}{2},\frac{Y-X}{2}.

In the 'strategic anchor' treatment the procedures are again similar to those in the baseline except for the following. Before participant A makes her decision on the value of X, participant C has to choose an integer number R with R\in\left[0,Y\right]. After this, participant A is shown the chosen number R and is asked wether she is planning to choose X to be larger (or equal) or smaller than R. After answering this question participant A continues as in the baseline by choosing X. Neither the anchoring number R, nor the question response by participant A will be communicated to participant B (and neither will the question response to participant C) and this is common knowledge. Subsequently the value of 'proposal' X will be communicated to participant B, who rejects or accepts based on his/her highest acceptable offer.. If B accepts the offer the payoffs for participants A,B and C will respectively be X,\frac{Y-X}{2},\frac{Y-X}{2}.

In the 'signalling anchor' the procedures are exactly similar to those in the 'strategic anchor' treatment, except that this time the anchor number R will be chosen by participant B instead of participant C, so in this treatment participant C is again a passive participant.
Experimental Design Details
Randomization Method
Randomisation of seatings when entering lab. Computer randomisation for the random anchor draw.
Randomization Unit
Treatment groups in a laboratory experiment
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
4 treatments
Sample size: planned number of observations
120 total data points
Sample size (or number of clusters) by treatment arms
Total aim is 360 participants in groups of 3, 4 treatments 30 datapoints per treatments, total approximately 120 datapoints.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan
Analysis Plan Documents
Pre-analysis plan for Bargaining and Anchoring.pdf

MD5: 26b408523ede636b28b47e1284df0fa6

SHA1: bf637d75cde0bea9097e32031e10550325f82c2f

Uploaded At: January 16, 2017

Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers