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Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection

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  • Jason Shachat

    ()
    (Wang Yanan Institute for Studies in Economics (WISE) and the MOE Key Laboratory in Econometrics, Xiamen University, Xiamen 361005, Fujian, China)

  • J. Todd Swarthout

    ()
    (Department of Economics, Georgia State University, Atlanta, GA 30303, USA)

Abstract

We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is.

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Bibliographic Info

Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 4 (2013)
Issue (Month): 4 (November)
Pages: 738-753

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Handle: RePEc:gam:jgames:v:4:y:2013:i:4:p:738-753:d:30826

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Keywords: ultimatum bargaining; auction; forward induction; loss avoidance;

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  1. John List & Todd Cherry, 2000. "Learning to Accept in Ultimatum Games: Evidence from an Experimental Design that Generates Low Offers," Experimental Economics, Springer, vol. 3(1), pages 11-29, June.
  2. Cachon, Gerard P & Camerer, Colin F, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 165-94, February.
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  18. repec:feb:framed:0088 is not listed on IDEAS
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