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What Do Bargainers' Preferences Look Like? Experiments with a Convex Ultimatum Game

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Author Info
James Andreoni
Marco Castillo
Ragan Petrie

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Abstract

The ultimatum game, by its all-or-nothing nature, makes it difficult to discern what kind of preferences may be generating choices. We explore a game that convexifies the decisions, allowing us a better look at the indifference curves of bargainers while maintaining the subgame-perfect equilibrium. We conclude that bargainers' preferences are convex and regular but not always monotonic. Money-maximization is the sole concern for about half of the subjects, while the other half reveal a preference for fairness. We also found, unexpectedly, the importance of risk aversion among money-maximizing proposers, which in turn generates significant bargaining power for fair-minded responders.

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File URL: http://hdl.handle.net/10.1257/000282803322157034
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 672-685
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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:672-685

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December. [Downloadable!] (restricted)
  2. Marlies Ahlert & Arwed Crüger & Werner Güth, 2001. "How Paulus Becomes Saulus An Experimental Study of Equal Punishment Games," Homo Oeconomicus, Institute of SocioEconomics, vol. 18, pages 303-318.
  3. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December. [Downloadable!] (restricted)
  4. Robert Slonim & Alvin E. Roth, 1998. "Learning in High Stakes Ultimatum Games: An Experiment in the Slovak Republic," Econometrica, Econometric Society, vol. 66(3), pages 569-596, May.
  5. Ochs, Jack & Roth, Alvin E, 1989. "An Experimental Study of Sequential Bargaining," American Economic Review, American Economic Association, vol. 79(3), pages 355-84, June. [Downloadable!] (restricted)
  6. Eckel, Catherine C & Grossman, Philip J, 2001. "Chivalry and Solidarity in Ultimatum Games," Economic Inquiry, Oxford University Press, vol. 39(2), pages 171-88, April.
  7. Gary E. Bolton & Axel Ockenfels, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March. [Downloadable!] (restricted)
  8. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
  9. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
  10. Jordi Brandts & Gary Charness, 2000. "Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games," Experimental Economics, Springer, vol. 2(3), pages 227-238, March. [Downloadable!] (restricted)
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  11. Suleiman, Ramzi, 1996. "Expectations and fairness in a modified Ultimatum game," Journal of Economic Psychology, Elsevier, vol. 17(5), pages 531-554, November. [Downloadable!] (restricted)
  12. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March. [Downloadable!] (restricted)
  13. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ronald Bosman & Heike Hennig-Schmidt & Frans Winden, 2006. "Exploring group decision making in a power-to-take experiment," Experimental Economics, Springer, vol. 9(1), pages 35-51, April. [Downloadable!] (restricted)
  2. Nagore Iriberri & Pedro Rey-Biel, 2008. "The Role of Role Uncertainty in Modified Dictator Games," Economics Working Papers 1147, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2009. [Downloadable!]
  3. Ernst Fehr & Klaus M. Schmidt, 2009. "On Inequity Aversion A Reply to Binmore and Shaked," Discussion Papers 256, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  4. James Andreoni & Marco Castillo & Ragan Petrie, 2005. "Revealing Preferences for Fairness in Ultimatum Bargaining," Levine's Bibliography 122247000000000807, UCLA Department of Economics. [Downloadable!]
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  5. Oliver Hart & John Moore, 2006. "Contracts as Reference Points," NBER Working Papers 12706, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. James Andreoni & William Harbaugh & Lise Vesterlund, 2003. "The Carrot or the Stick: Rewards, Punishments, and Cooperation," American Economic Review, American Economic Association, vol. 93(3), pages 893-902, June. [Downloadable!]
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  7. Gary E. Bolton & Axel Ockenfels, 2008. "Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  8. repec:att:wimass:1920413 is not listed on IDEAS
  9. Roe, Brian E. & Wu, Steven Y., 2009. "Do the Selfish Mimic Cooperators? Experimental Evidence from Finitely-Repeated Labor Markets," IZA Discussion Papers 4084, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Andreas Nicklisch, 2008. "Inequity Aversion, Reciprocity, and Appropriateness in the Ultimatum-Revenge Game," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_24, Max Planck Institute for Research on Collective Goods. [Downloadable!]
  11. Abigail Barr & Chris Wallace & Jean Ensminger & Joseph Henrich & Clark Barrett & Alexander Bolyanatz & Juan Camilo Cardenas & Michael Gurven & Edwins Gwako & Carolyn Lesorogol & Frank Marlowe & Richar, 2009. "Homo Aequalis: A Cross-Society Experimental Analysis of Three Bargaining Games," Economics Series Working Papers 422, University of Oxford, Department of Economics. [Downloadable!]
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  12. Stephen L. Cheung, 2008. "Using Mobile Phone Messaging as a Response Medium in Classroom Experiments," Journal of Economic Education, Helen Dwight Reid Foundation, vol. 39(1), pages 51-67. [Downloadable!]
  13. Ben Greiner, 2004. "Bounded Rationality in Bargaining Games: Do Proposers Believe That Responders Reject an Equal Split?," Working Paper Series in Economics 11, University of Cologne, Department of Economics. [Downloadable!]
  14. Laura Schechter, 2005. "Traditional Trust Measurement and the Risk Confound: An Experiment in Rural Paraguay," Artefactual Field Experiments 0077, The Field Experiments Website. [Downloadable!]
  15. Wu, Steven & Roe, Brian, 2004. "Tournaments, Risk Perceptions, And Fairness," 2004 Annual meeting, August 1-4, Denver, CO 20154, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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