The Use of Simulation to Test Theories of Bargaining in a Business Context

Abstract

The purpose of this research is to demonstrate how simulation can be used to empirically test theories of bargaining in a business context. Business negotiations are private, complex and multi-issue; there are thus limitations to investigating them through field study. The advantage of simulation as a theorytesting methodology is that it can provide a rich context while at the same time permit experimental control and measurement. In particular, this research demonstrates how simulation can be used to test a game- theoretic model of bargaining. The experiment reported here is highlighted by the use of multiattribute preference measurement and an experimental design that allows a rigorous test of the game-theoretic model as well as unconfounded estimation of bargaining skill and situational power effects. The results of this research support the game theoretic model. Implications for educators and practitioners are discussed.