THE RELATIONSHIP BETWEEN UNCERTAINTY, THE CONTRACT ZONE, AND EFFICIENCY IN A BARGAINING EXPERIMENT

Research on bargaining suggests that the efficiency of bargaining is r elated to the size of the surplus to be divided and to uncertainty abo ut the opponent. We conducted a bargaining experiment which manipulate d both of these factors. We find that the presence of uncertainty decr eases bargaining efficiency, while the effect of contract zone size de pends on whether there is uncertainty or certainty.