Munich Personal RePEc Archive

Generosity in bargaining: Fair or fear?

Breitmoser, Yves and Tan, Jonathan H.W. (2010): Generosity in bargaining: Fair or fear?

[img]
Preview
PDF
MPRA_paper_27444.pdf

Download (406Kb) | Preview

Abstract

Are "generous" bargaining offers made out of fairness or in fear of rejection? We disentangle risk and social references by analyzing experimental behavior in three majority bargaining games: (1) a random-proposer game with infinite time horizon; 2) a one round proposer game with disagreement payoffs equal to the infinite horizon continuation payoffs; and, (3) a demand commitment game. Inequity aversion predicts very differently across these games, but risk aversion does not. Observed strategies violate neither stationarity nor truncation consistency. This allows us to use structural models of bargaining behavior to estimate the latent type shares of subjects with CES, inequity averse, and Prospect theoretic preferences. The Prospect theoretic, i.e. reference-dependent, model of utility explains the observations far better than any mixture of alternative models.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.