On welfarism and scale invariance: What do bargainers bargain about?

Abstract

We experimentally test welfarism and scale invariance, two prominent simplifying assumptions that are often used to characterize bargaining solutions in theoretical models. Our study relies on a context-rich bargaining environment and varies the parameters of the bargaining problem along with the information that bargaining parties have about each other. Under the auxiliary assumption of selfishness, it aims at understanding whether bargaining is guided by abstract utilities as assumed by the classic version of cooperative bargaining theory or rather by comparisons in observables (e.g., money) as often assumed by behavioral models of decision-making. The experimental results show that welfarism and scale invariance are supported when the relevant information is only privately known. In general, bargaining outcomes are robust to rescaling that only affects the anchoring points of the utility scale (welfarism), but not to rescaling that affects the units on the utility scale (scale invariance). Overall, our experimental data deliver scarce empirical support to classic theoretical bargaining solutions based on abstract utility units.