Learning to bargain

This paper studies how children learn to bargain. We performed simple anonymous bargaining experiments with real payoffs with 256 children from age 8 to 18. Average offers by even the youngest children were close to the amount that maximized their expected monetary payoff. Furthermore offers and responses were similar to what others have reported for adults. The variance of proposals was higher among younger children. Children showed clear evidence of reinforcement learning, responding to a rejection by increasing subsequent proposals. This pattern was strongest for the youngest children, who tended to respond to rejections with larger than payoff-maximizing increases in proposals. We found mixed support for social learning: while proposals increased after other children made larger proposals, they did not increase after proposals by others were rejected.