Kohler, Stefan (2012): Guilt causes equal or unequal division in alternating-offer bargaining.
Download (149kB) | Preview
Parties in a bargaining situation may perceive guilt, a utility loss caused by receiving the larger share that is modeled in some social preferences. I extend Rubinstein (1982)'s solution of the open-ended alternating-offer bargaining problem for self-interested bargainers to a game with equally patient bargainers that exhibit a similar degree of guilt. The bargaining parties still reach agreement in the first period. If guilt is strong, they split the bargaining surplus equally. In contrast, if guilt is weak, the bargaining outcome is tilted away from the Rubinstein division towards a more unequal split. As both bargainers sensation of guilt diminishes, the bargaining outcome converges to the Rubinstein division.
|Item Type:||MPRA Paper|
|Original Title:||Guilt causes equal or unequal division in alternating-offer bargaining|
|Keywords:||alternating offers; bargaining; bargaining power; behavioral economics; equity; fairness; guilt; inequality aversion; negotiation; social preferences|
|Subjects:||D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory
D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
|Depositing User:||Stefan Kohler|
|Date Deposited:||12 Sep 2012 12:48|
|Last Modified:||07 Oct 2016 15:17|
Bolton, G. E., & Ockenfels, A. (2000). ERC: A theory of equity, reciprocity and competition. American Economic Review, 90, 166–193.
Cooper, D. J., & Kagel, J. H. (n.d.). Other regarding preferences: A selective survey of experimental results. In J. H. Kagel, & A. E. Roth (Eds.), Handbook of Experimental Economics, Volume 2. Princeton: Princeton University Press.
De Bruyn, A., & Bolton, G. E. (2008). Estimating the influence of fairness on bargaining behavior. Management Science, 54, 1774–1791.
Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114, 817–868.
Kohler, S. (2008). Inequality aversion and stochastic decision-making: Experimental evidence from Zimbabwean villages after land reform. In A. Innocenti, & P. Sbriglia (Eds.), Games, Rationality and Behavior: Essays on Behavioral Game Theory and Experiments (pp. 63–100). Basingstoke: Palgrave McMillan.
Kohler, S. (2011). Altruism and fairness in experimental decisions. Journal of Economic Behavior & Organization, 80, 101–109.
Kohler, S. (2012). Envy can promote more equal division in alternating-offer bargaining. MPRA Paper 40761, University Library of Munich, Germany.
Montero, M. (2008). Altruism, spite and competition in bargaining games. Theory and Decision, 65, 125–151.
Rubinstein, A. (1982). Perfect equilibrium in a bargaining model. Econometrica, 50, 97–109.
Shaked, A., & Sutton, J. (1984). Involuntary unemployment as a perfect equilibrium in a bargaining model. Econometrica, 52, 1351–1364.
Von Neumann, J., & Morgenstern, O. (1944). Theory of Games and Economic Behavior. Princeton, New Jersey, USA: Princeton University Press.