Effect of reduced opportunities on bargaining outcomes: an experiment with status asymmetries (Q2202236)

Cooperative bargaining game theory has often been concerned with whether expected bargaining outcomes could be altered by certain contractions of the feasible set. It is well known that several allocation rules (such as the \textit{Kalai-Smorodinsky} solution) allow for possible violations of the ``independence of irrelevant alternatives'' (IIA) axiom in cooperative bargaining game theory. The author find that certain contractions of feasible sets do significantly alter bargaining outcomes when the negotiating agents are asymmetric (in terms of bargaining power) and the higher asymmetry between agents, the greater is effect of such contractions. It is shown that contractions of feasible sets do not alter bargaining outcomes when the agents are perfectly symmetric, thereby subsuming the findings of \textit{R. V. Nydegger} and \textit{G. Owen} [Int. J. Game Theory 3, 239--249 (1974; Zbl 0304.90130)] in this more general setting. The author provides important insights on when to, and when not to, expect changes in bargaining outcomes due to contraction. For some details, see, Appendix 4: Derivations of the bargaining solutions.