Backward Induction or Forward Reasoning? – An Experiment of Stochastic Alternating Offer Bargaining – Volume 6 Jena Economic Research Papers 2012-07-12 2012 2007 2012-041 backward induction forward reasoning bargaining Bounded rationality questions backward induction, which however, does not exclude such reasoning when anticipation is easy. In our stochastic (alternating offer) bargaining experiment, there is a certain first-period pie and a known finite deadline. What is uncertain (except for the final period) is whether there is a further period. Whereas backward induction requires information about all later pie sizes and probabilities, forward reasoning is expected to consider only the immediate prospects. Rather than relying only on decision data, we try to assess the cognitive approach such as forward reasoning of backward induction by control of information retrieval. We find that participants who begin with the shortest games before playing possibly longer games, initially resort to backward induction before switching to forward-looking behavior. jportal_jpjournal_00000016 2012-07-12T06:18:25.770Z 2012-07-12T06:18:04.813Z