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Inequity Aversion May Increase Inequity

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  • Maria Montero

Abstract

Inequity aversion models have been used to explain equitable payoff divisions in bargaining games. I show that inequity aversion can actually "increase" the asymmetry of payoff division if unanimity is not required. This is because responders may be willing to accept a lower share rather than risk being left out. Inequity aversion may also affect comparative statics: the advantage of being the proposer can "decrease" as players become more impatient. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 117 (2007)
Issue (Month): 519 (03)
Pages: C192-C204

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Handle: RePEc:ecj:econjl:v:117:y:2007:i:519:p:c192-c204

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References

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  1. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
  2. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
  3. Akira Okada & Arno Riedl, 1999. "Inefficiency and Social Exclusion in a Coalition Formation Game: Experimental Evidence," Tinbergen Institute Discussion Papers 99-044/1, Tinbergen Institute.
  4. Kalandrakis, Anastassios, 2004. "A three-player dynamic majoritarian bargaining game," Journal of Economic Theory, Elsevier, vol. 116(2), pages 294-322, June.
  5. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer, vol. 4(3), pages 203-219, December.
  6. Montero, Maria, 2006. "Noncooperative foundations of the nucleolus in majority games," Games and Economic Behavior, Elsevier, vol. 54(2), pages 380-397, February.
  7. Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998. "Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study," Levine's Working Paper Archive 344, David K. Levine.
  8. William Neilson, 2006. "Axiomatic reference-dependence in behavior toward others and toward risk," Economic Theory, Springer, vol. 28(3), pages 681-692, 08.
  9. Guillaume R. Frechette & John H. Kagel & Steven Lehrer, 2000. "Bargaining in Legislatures: An Experimental Investigation of Open versus Closed Amendment Rules," Econometric Society World Congress 2000 Contributed Papers 1515, Econometric Society.
  10. Harrington, Joseph E, Jr, 1990. " The Role of Risk Preferences in Bargaining When Acceptance of a Proposal Requires Less than Unanimous Approval," Journal of Risk and Uncertainty, Springer, vol. 3(2), pages 135-54, June.
  11. Gary E. Bolton & Axel Ockenfels, 1998. "Strategy and Equity: An ERC Analysis of the Guth-van Damme Game," Levine's Working Paper Archive 2060, David K. Levine.
  12. Frechette, Guillaume & Kagel, John H. & Morelli, Massimo, 2005. "Nominal bargaining power, selection protocol, and discounting in legislative bargaining," Journal of Public Economics, Elsevier, vol. 89(8), pages 1497-1517, August.
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Citations

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Cited by:
  1. Guillaume R. Frechette & John H. Kagel & Massimo Morelli, 2010. "Pork Versus Public Goods: An Experimental Study of Public Good Provision Within a Legislative Bargaining Framework," Economics Working Papers ECO2010/37, European University Institute.
  2. Maria Montero, 2005. "Altruism, Spite and Competition in Bargaining Games," Game Theory and Information 0512004, EconWPA.
  3. Yves Breitmoser, 2011. "Parliamentary bargaining with priority recognition for committee members," Social Choice and Welfare, Springer, vol. 37(1), pages 149-169, June.
  4. John Duffy & Felix Munoz-Garcia, 2009. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Working Papers 383, University of Pittsburgh, Department of Economics, revised May 2009.
  5. Breitmoser, Yves & Tan, Jonathan H.W., 2013. "Reference dependent altruism in demand bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 127-140.
  6. Michalis Drouvelis & Maria Montero & Martin Sefton, . "Gaining Power through Enlargement: Strategic Foundations and Experimental Evidence," Discussion Papers 09/30, Department of Economics, University of York.
  7. Breitmoser, Yves & Tan, Jonathan H.W., 2010. "Generosity in bargaining: Fair or fear?," MPRA Paper 27444, University Library of Munich, Germany.
  8. Stefan Kohler, 2012. "Incomplete Information about Social Preferences Explains Equal Division and Delay in Bargaining," Games, MDPI, Open Access Journal, vol. 3(3), pages 119-137, September.
  9. Kohler, Stefan, 2012. "Envy can promote more equal division in alternating-offer bargaining," MPRA Paper 40761, University Library of Munich, Germany.
  10. Breitmoser, Yves & Tan, Jonathan H.W., 2011. "Ultimata bargaining: generosity without social motives," MPRA Paper 33613, University Library of Munich, Germany.
  11. Rasch, Alexander & Wambach, Achim & Wiener, Kristina, 2012. "Bargaining and inequity aversion: On the efficiency of the double auction," Economics Letters, Elsevier, vol. 114(2), pages 178-181.
  12. Breitmoser, Yves & Tan, Jonathan H.W., 2014. "Reference Dependent Altruism," MPRA Paper 52774, University Library of Munich, Germany.
  13. Kohler, Stefan, 2013. "Inequality aversion causes equal or unequal division in alternating-offer bargaining," MPRA Paper 40764, University Library of Munich, Germany.
  14. Gary Bolton & Jeannette Brosig-Koch, 2012. "How do coalitions get built? Evidence from an extensive form coalition game with and without communication," International Journal of Game Theory, Springer, vol. 41(3), pages 623-649, August.

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