The Attraction and Compromise Effects in Bargaining: Experimental Evidence
34 Pages Posted: 18 Feb 2021
Date Written: January 7, 2021
We experimentally investigate, in an unstructured bargaining environment with commonly
known money payoffs, the Attraction Effect and Compromise Effect (AE and CE) in bargaining,
namely a tendency for bargainers to agree to an intermediate option (CE), or to an option
that dominates another option (AE). We conjecture that the relevance of the AE and CE in
bargaining is constrained by how focal the feasible agreements’ payoffs are. We indeed observe
that there are significant AEs and CEs, but these effects are mediated by the efficiency and
equality properties of the feasible agreements. Due to the allure of equality, the effects are
harder to observe when an equal earnings contract is available. Decoys are more effective in
shifting agreements from a very unequal contract to a less unequal one rather than the reverse.
Keywords: bargaining, attraction effect, compromise effect, focality, equality, efficiency.
JEL Classification: C70, C72, C92.
Suggested Citation: Suggested Citation