Breitmoser, Yves and Tan, Jonathan H.W. (2011): Ultimata bargaining: generosity without social motives.
Download (276kB) | Preview
We show and explain how generosity beyond that explainable by social preferences can manifest in bargaining. We analyze an ultimata game with two parties vying to coalesce with a randomly chosen proposer. They simultaneously demand shares of the surplus. The proposer must then make an offer that meets at least one demand, or else the game either continues with a new round or breaks down with all earning zero. Self-interest, altruism, and inequity aversion univocally predict miniscule demands due to inter-party competition; proposers thus obtain the lion's share. We experimentally observe that proposers coalesce with the less demanding party by strategically matching demands, like ultimatum bargaining, but also give non-strategically to the other party, like dictator giving. The observations are incompatible with concave utilities, as implied by social preferences, but are compatible with reference dependent preferences.
|Item Type:||MPRA Paper|
|Original Title:||Ultimata bargaining: generosity without social motives|
|Keywords:||demand commitment, ultimata bargaining, non-cooperative, laboratory experiment, social preferences, reference dependence|
|Subjects:||C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior
|Depositing User:||Yves Breitmoser|
|Date Deposited:||22 Sep 2011 13:13|
|Last Modified:||17 Aug 2016 12:03|
Andreoni, J. and Bernheim, B. (2009). Social image and the 50–50 norm: A theoretical and experimental analysis of audience effects. Econometrica, 77(5):1607–1636.
Andreoni, J. and Miller, J. (2002). Giving according to garp: An experimental test of the consistency of preferences for altruism. Econometrica, 70(2):737–753.
Baron, D. (1989). A noncooperative theory of legislative coalitions. American Journal of Political Science, 33(4):1048–1084.
Baron, D. and Ferejohn, J. (1989). Bargaining in legislatures. The American Political Science Review, 83(4):1181–1206.
Bicchieri, C. and Chavez, A. (2010). Behaving as expected: Public information and fairness norms. Journal of Behavioral Decision Making, 23(2):161–178.
Bolton, G. and Ockenfels, A. (2000). ERC: A theory of equity, reciprocity, and competition. American Economic Review, 90(1):166–193.
Brams, S. and Affuso, P. (1976). Power and size: A new paradox. Theory and Decision, 7(1):29–56.
Breitmoser, Y. (2009). Demand commitments in majority bargaining or how formateurs get their way. International Journal of Game Theory, 38(2):183–191.
Breitmoser, Y., Tan, J., and Zizzo, D. (2010). Understanding perpetual R&D races. Economic Theory, 44(3):445–467.
Butler, C. (2008). Prospect Theory and Coercive Bargaining. Journal of Conflict Resolution, 51(2):227–250.
Camerer, C. (2003). Behavioral game theory: Experiments in strategic interaction. Princeton University Press Princeton, NJ.
Cardona-Coll, D. and Mancera, F. M. (2000). Demand bargaining in legislatures. Economic Theory, 16(1):163–180.
Cox, J., Friedman, D., and Gjerstad, S. (2007). A tractable model of reciprocity and fairness. Games and Economic Behavior, 59(1):17–45.
Croson, R. (1996). Information in ultimatum games: An experimental study. Journal of Economic Behavior and Organization, 30(2):197–212.
Dana, J., Cain, D., and Dawes, R. (2006). What you don’t know won’t hurt me: Costly (but quiet) exit in dictator games. Organizational Behavior and Human Decision Processes, 100(2):193–201.
Dana, J., Weber, R., and Kuang, J. (2007). Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness. Economic Theory, 33(1):67–80.
Drouvelis, M., Montero, M., and Sefton, M. (2010). Gaining power through enlargement: Strategic foundations and experimental evidence. Games and Economic Behavior, 69(2):274–292.
Dufwenberg, M. and Gneezy, U. (2000). Price competition and market concentration: an experimental study. International Journal of Industrial Organization, 18(1):7–22.
Fehr, E. and Schmidt, K. (1999). A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114(3):817–868.
Fischbacher, U. (2007). z-tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2):171–178.
Forsythe, R., Horowitz, J., Savin, N., and Sefton, M. (1994). Fairness in simple bargaining experiments. Games and Economic behavior, 6(3):347–369.
Fréchette, G., Kagel, J., and Morelli, M. (2005). Behavioral identification in coalitional bargaining: An experimental analysis of demand bargaining and alternating offers. Econometrica, 73(6):1893–1937.
Güth, W., Huck, S., and Ockenfels, P. (1996). Two-level ultimatum bargaining with incomplete information: An experimental study. The Economic Journal, pages 593–604.
Güth, W., Schmittberger, R., and Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of Economic Behavior & Organization, 3(4):367–388.
Güth, W. and van Damme, E. (1998). Information, strategic behavior, and fairness in ultimatum bargaining: An experimental study. Journal of Mathematical Psychology, 42(2-3):227–247.
Harrington, J. (1990). The power of the proposal maker in a model of endogenous agenda formation. Public Choice, 64(1):1–20.
Kagel, J., Kim, C., and Moser, D. (1996). Fairness in ultimatum games with asymmetric information and asymmetric payoffs. Games and Economic Behavior, 13(1):100–110.
Kagel, J. and Wolfe, K. (2001). Tests of fairness models based on equity considerations in a three-person ultimatum game. Experimental Economics, 4(3):203–219.
Kahneman, D. and Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2):263–291.
Knez, M. and Camerer, C. (1995). Outside options and social comparison in three-player ultimatum game experiments. Games and Economic Behavior, 10(1):65–94.
Kohler, S. (2011). Altruism and fairness in experimental decisions. Journal of Economic Behavior & Organization.
Koszegi, B. (2010). Utility from anticipation and personal equilibrium. Economic Theory, 44(3):415–444.
Koszegi, B. and Rabin, M. (2006). A model of reference-dependent preferences. Quarterly Journal of Economics, 121(4):1133–1165.
Koszegi, B. and Rabin, M. (2007). Reference-dependent risk attitudes. The American Economic Review, 97(4):1047–1073.
McKelvey, R. and Palfrey, T. (1998). Quantal response equilibria for extensive form games. Experimental Economics, 1(1):9–41.
Montero, M. (2007). Inequity aversion may increase inequity. The Economic Journal, 117(519):192–204.
Montero, M., Sefton, M., and Zhang, P. (2008). Enlargement and the balance of power: an experimental study. Social Choice and Welfare, 30(1):69–87.
Montero, M. and Vidal-Puga, J. J. (2007). Demand commitment in legislative bargaining. American Political Science Review, 101(4):847–50.
Montero, M. and Vidal-Puga, J. J. (2011). Demand bargaining and proportional payoffs in majority games. Games and Economic Behavior, 71(2):395–408.
Morelli, M. (1999). Demand competition and policy compromise in legislative bargaining. The American Political Science Review, 93(4):809–820.
Neilson, W. (2006). Axiomatic reference-dependence in behavior toward others and toward risk. Economic Theory, 28(3):681–692.
Poulsen, A. and Tan, J. (2007). Information acquisition in the ultimatum game: An experimental study. Experimental Economics, 10(4):391–409.
Shalev, J. (2000). Loss aversion equilibrium. International Journal of Game Theory, 29(2):269–287.
Shalev, J. (2002). Loss aversion and bargaining. Theory and Decision, 52(3):201–232.
Straub, P. G. and Murnighan, J. K. (1995). An experimental investigation of ultimatum games: Information, fairness, expectations, and lowest acceptable ofers. Journal of Economic Behavior and Organization, 27(3):345–364.
Tan, J. and Bolle, F. (2006). On the relative strengths of altruism and fairness. Theory and Decision, 60(1):35–67.
Turocy, T. (2010). Using quantal response to compute Nash and sequential equilibria. Economic Theory, 42(1).
Vidal-Puga, J. (2004). Bargaining with commitments. International Journal of Game Theory, 33(1):129–144.
Winter, E. (1994a). The demand commitment bargaining and snowballing cooperation. Economic Theory, 4(2):255–273.
Winter, E. (1994b). Non-cooperative bargaining in natural monopolies. Journal of Economic Theory, 64:202–220.