Incorporating fairness motives into the Impulse Balance Equilibrium concept: an application to experimental 2X2 games

Tavoni, Alessandro (2007): Incorporating fairness motives into the Impulse Balance Equilibrium concept: an application to experimental 2X2 games.

Abstract

Substantial evidence has been accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically, often by introducing a reference point to which players compare the available payoff allocations, as in impulse balance equilibrium (Selten & Chmura, forthcoming) and in the inequity aversion model (Fehr & Schmidt,1999). The purpose of this paper is to review some features of this recent literature and to propose a new, empirically sound, unifying concept which combines elements of fairness with reference considerations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fairness, Inequity aversion, Aspiration level, Impulse balance, Behavioral economics, Experimental economics, Jacknife estimator
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; 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

References

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SELTEN, R., CHMURA, T. (Forthcoming): Stationary Concepts for Experimental 2x2 Games