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A Bargaining Model of Domestic Politics and the Cost of War
Unformatted Document Text:  (p = 0.2) to a strong position (p = 0.8). This is because weak proposers make modest de- mands and strong proposers make aggressive demands. This also is intriguing with regard to the literature on interstate conflict which largely takes demands in interstate crises to arise exogenously to power. 6 The effect of the win probability on average proposer demands is in the predicted direction for all 8 sessions, a result that is significant using a standard non-parametric test. Data from the first round of play offer a quite different prespective, as shown in Figure 2, where the rationality parameter used in the QRE predictions has been reduced by an order of magnitude from 1.6 to 0.2. The initial proposer demands are clearly much flatter in the first round data, and conflicts are much more likely when there is an imbalance of power in favor of the challenger, as indicated by the strong upward slope of the conflict proportion line on the right side of Figure 2. 7 ****Figure 2 About Here**** Although high-noise calculations seem to approximate the average outcomes across treat- ments for the first-round data, this is not the whole story, since these calculations overstate the spread in decisions within a given treatment. Moreover, a change in the proposer’s status quo allocation, say from $3 to $5, has no effect on the predictions in this simple model, but it would likely have an effect in the experiments. As Tversky & Kahneman (1992) have shown, loss aversion relative to a reference point, a status quo for instance, implies a kink in the value function that induces risk aversion for decisions that span both gains and losses, as is the case with our conflict bargaining games. 8 The flatness of proposer offers relative to theoretical predictions, especially in the first round of our experiments, indicates that the 6 Notable exceptions to this include work by Powell (1999), Werner (1999), Reed, Clark, Nordstrom & Hwang (2006) and Reed, Clark, Nordstrom & Hwang (2008). 7 The first round results exhibit more noise, a higher proportion of conflicts across treatments, and a strong correlation between the challenger’s power and initial demands that is not present in the last-halfdata. Further experimentation and modeling, with matched single-round and multi-round treatments, areneeded to isolate the causes of these differences. 8 Carlson and Dacey (2004, 2006, 2007) also show loss aversion to produce risk averse rather than risk seeking behavior. 15

Authors: Clark, David., Holt, Charles., Nordstrom, Timothy., Reed, William. and Sieberg, Katri.
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(p = 0.2) to a strong position (p = 0.8). This is because weak proposers make modest de-
mands and strong proposers make aggressive demands. This also is intriguing with regard
to the literature on interstate conflict which largely takes demands in interstate crises to
arise exogenously to power.
6
The effect of the win probability on average proposer demands
is in the predicted direction for all 8 sessions, a result that is significant using a standard
non-parametric test.
Data from the first round of play offer a quite different prespective, as shown in Figure 2,
where the rationality parameter used in the QRE predictions has been reduced by an order
of magnitude from 1.6 to 0.2. The initial proposer demands are clearly much flatter in the
first round data, and conflicts are much more likely when there is an imbalance of power in
favor of the challenger, as indicated by the strong upward slope of the conflict proportion
line on the right side of Figure 2.
7
****Figure 2 About Here****
Although high-noise calculations seem to approximate the average outcomes across treat-
ments for the first-round data, this is not the whole story, since these calculations overstate
the spread in decisions within a given treatment. Moreover, a change in the proposer’s status
quo allocation, say from $3 to $5, has no effect on the predictions in this simple model, but
it would likely have an effect in the experiments. As Tversky & Kahneman (1992) have
shown, loss aversion relative to a reference point, a status quo for instance, implies a kink in
the value function that induces risk aversion for decisions that span both gains and losses,
as is the case with our conflict bargaining games.
8
The flatness of proposer offers relative to
theoretical predictions, especially in the first round of our experiments, indicates that the
6
Notable exceptions to this include work by Powell (1999), Werner (1999), Reed, Clark, Nordstrom &
Hwang (2006) and Reed, Clark, Nordstrom & Hwang (2008).
7
The first round results exhibit more noise, a higher proportion of conflicts across treatments, and a
strong correlation between the challenger’s power and initial demands that is not present in the last-half
data. Further experimentation and modeling, with matched single-round and multi-round treatments, are
needed to isolate the causes of these differences.
8
Carlson and Dacey (2004, 2006, 2007) also show loss aversion to produce risk averse rather than risk
seeking behavior.
15


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