Focal points and payoff information in tacit bargaining

Abstract

Schelling proposed that payoff-irrelevant cues can affect the outcome of tacit bargaining games by creating focal points. Tests of this hypothesis have found that conflicts of interest between players inhibit focal-point reasoning. We investigate experimentally whether this effect is reduced if players have imperfect information about each other's payoffs. When players know only their own payoffs, they fail to ignore this information even though it cannot assist coordination; the effects of payoff-irrelevant cues on coordination success are small. When no exact information about payoffs is provided, payoff-irrelevant cues are more helpful, but not as much as when conflict is absent.