Asymmetric outside options in ultimatum bargaining: a systematic analysis

Asymmetric outside options in ultimatum bargaining: a systematic analysis We set up a laboratory experiment to investigate systematically how varying the magnitude of outside options—the payoffs that materialize in case of a bargaining breakdown—of proposers and responders influences players’ demands and game outcomes (rejection rates, payoffs, efficiency) in ultimatum bargaining. We find that proposers as well as responders gradually increase their demands when their respective outside option increases. Rejections become more likely when the asymmetry in the players’ outside options is large. Generally, the predominance of the equal split decreases with increasing outside options. From a theoretical benchmark perspective we find a low predictive power of equilibria based on self-regarding preferences or inequity aversion. However, proposers and responders seem to be guided by the equity principle (Selten, The equity principle in economic behavior. Decision Theory, Social Ethics, Issues in Social Choice. Gottinger, Hans-Werner and Leinfellner, Werner, pp 269–281, 1978), while they apply equity rules inconsistently and self-servingly. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Game Theory Springer Journals

Asymmetric outside options in ultimatum bargaining: a systematic analysis

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Publisher
Springer Journals
Copyright
Copyright © 2017 by Springer-Verlag GmbH Germany
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Behavioral/Experimental Economics; Operations Research/Decision Theory
ISSN
0020-7276
eISSN
1432-1270
D.O.I.
10.1007/s00182-017-0588-4
Publisher site
See Article on Publisher Site

Abstract

We set up a laboratory experiment to investigate systematically how varying the magnitude of outside options—the payoffs that materialize in case of a bargaining breakdown—of proposers and responders influences players’ demands and game outcomes (rejection rates, payoffs, efficiency) in ultimatum bargaining. We find that proposers as well as responders gradually increase their demands when their respective outside option increases. Rejections become more likely when the asymmetry in the players’ outside options is large. Generally, the predominance of the equal split decreases with increasing outside options. From a theoretical benchmark perspective we find a low predictive power of equilibria based on self-regarding preferences or inequity aversion. However, proposers and responders seem to be guided by the equity principle (Selten, The equity principle in economic behavior. Decision Theory, Social Ethics, Issues in Social Choice. Gottinger, Hans-Werner and Leinfellner, Werner, pp 269–281, 1978), while they apply equity rules inconsistently and self-servingly.

Journal

International Journal of Game TheorySpringer Journals

Published: Aug 17, 2017

References

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