Equity and bargaining power in ultimatum games

Rodriguez-Lara, Ismael (2016): Equity and bargaining power in ultimatum games. Forthcoming in: Journal of Economic Behavior and Organization

Abstract

This paper studies the extent to which offers and demands in ultimatum games are consistent with equity theory when there is a joint endowment to be distributed. Using a within-subject design, we also investigate the importance of the bargaining power by comparing the subjects’ behavior in the ultimatum and the no-veto-cost game, which differ in the possible cost of responders rejecting the proposers’ offer. Our findings suggest that proposers are willing to reward responders for their contribution to the joint endowment in any of the two games. As for responders, their behavior is consistent with equity theory only in the no-veto-cost game (in which a rejection is costless for them) when the game is first played. When the no-veto-cost game is played after the ultimatum game, we observe that the responders’ demands usually exceed their contribution to the endowment. Finally, this paper reports evidence that the ultimatum and the no-veto-cost game differ in terms of efficiency and rejection rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: equity, fairness, bargaining power, ultimatum game, no-veto-cost game, joint production, efficiency, rejection rates.
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D3 - Distribution; D - Microeconomics > D6 - Welfare Economics; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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