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Explaining Bargaining Impasse: The Role of Self-Serving Biases

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  • Linda Babcock
  • George Loewenstein

Abstract

The authors review studies conducted by themselves and coauthors that document a 'self-serving' bias in judgments of fairness and demonstrate that the bias is an important cause of impasse in negotiations. They discuss experimental evidence showing that (1) the bias causes impasse; (2) it is possible to reduce impasses by debiasing bargainers; and (3) the bias results from selective evaluation of information. The authors also review results from a field study of negotiations between teachers' unions and school boards in Pennsylvania that both document the fairness bias in a naturalistic setting and demonstrates its impact on strikes.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.11.1.109
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 11 (1997)
Issue (Month): 1 (Winter)
Pages: 109-126

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Handle: RePEc:aea:jecper:v:11:y:1997:i:1:p:109-26

Note: DOI: 10.1257/jep.11.1.109
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  1. Knez Marc J. & Camerer Colin F., 1995. "Outside Options and Social Comparison in Three-Player Ultimatum Game Experiments," Games and Economic Behavior, Elsevier, vol. 10(1), pages 65-94, July.
  2. Babcock, Linda, et al, 1995. "Biased Judgments of Fairness in Bargaining," American Economic Review, American Economic Association, vol. 85(5), pages 1337-43, December.
  3. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  4. Bell,David E. & Raiffa,Howard & Tversky,Amos (ed.), 1989. "Decision Making," Cambridge Books, Cambridge University Press, number 9780521368513, April.
  5. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
  6. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  7. Loewenstein, George, et al, 1993. "Self-Serving Assessments of Fairness and Pretrial Bargaining," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 135-59, January.
  8. Roth, Alvin E & Murnighan, J Keith, 1982. "The Role of Information in Bargaining: An Experimental Study," Econometrica, Econometric Society, vol. 50(5), pages 1123-42, September.
  9. Wade-Benzoni, Kimberly A. & Tenbrunsel, Ann E. & Bazerman, Max H., 1996. "Egocentric Interpretations of Fairness in Asymmetric, Environmental Social Dilemmas: Explaining Harvesting Behavior and the Role of Communication," Organizational Behavior and Human Decision Processes, Elsevier, vol. 67(2), pages 111-126, August.
  10. Joseph S. Tracy, 1986. "An Empirical Test of an Asymmetric Information Model of Strikes," NBER Working Papers 1870, National Bureau of Economic Research, Inc.
  11. Kennan, John, 1985. "The duration of contract strikes in U.S. manufacturing," Journal of Econometrics, Elsevier, vol. 28(1), pages 5-28, April.
  12. Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen.
  13. Terrance Odean., 1996. "Volume, Volatility, Price and Profit When All Trader Are Above Average," Research Program in Finance Working Papers RPF-266, University of California at Berkeley.
  14. Farber, Henry S, 1978. "Bargaining Theory, Wage Outcomes, and the Occurrence of Strikes: An Econometric Analysis," American Economic Review, American Economic Association, vol. 68(3), pages 262-71, June.
  15. Kagel, John H. & Kim, Chung & Moser, Donald, 1996. "Fairness in Ultimatum Games with Asymmetric Information and Asymmetric Payoffs," Games and Economic Behavior, Elsevier, vol. 13(1), pages 100-110, March.
  16. Babcock, Linda & Wang, Xianghong & Lowenstein, George, 1996. "Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 1-19, February.
  17. Blount, Sally, 1995. "When Social Outcomes Aren't Fair: The Effect of Causal Attributions on Preferences," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(2), pages 131-144, August.
  18. Card, David, 1990. "Strikes and Wages: A Test of an Asymmetric Information Model," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 625-59, August.
  19. McConnell, Sheena, 1989. "Strikes, Wages, and Private Information," American Economic Review, American Economic Association, vol. 79(4), pages 801-15, September.
  20. Tracy, Joseph S, 1986. "An Investigation into the Determinants of U.S. Strike Activity," American Economic Review, American Economic Association, vol. 76(3), pages 423-36, June.
  21. Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1996. "On Expectations and the Monetary Stakes in Ultimatum Games," International Journal of Game Theory, Springer, vol. 25(3), pages 289-301.
  22. Akerlof, George A & Yellen, Janet L, 1985. "Unemployment through the Filter of Memory," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 747-73, August.
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