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Does Fairness of the Outside Option Matter?

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Abstract

Experimental evidence suggests that the size of the foregone outside option does not affect the behavior of the opponent in a lost wallet and pie sharing games but that it matters in a mini-ultimatum game. In this paper we experimentally test a conjecture that it is the fairness property of the outside option which could be responsible for this effect. We compare the behavior of subjects in the lost wallet game when they face a fully unequal (“unfair”) outside option, i.e., the first mover gets 10 and the second mover gets nothing, and when they face an equal (“fair”) outside option, i.e., both get an equal amount of 5. Contrary to our conjecture we do not find a significant difference.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0806.pdf
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Bibliographic Info

Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 08/06.

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Length: 10 pages
Date of creation: 13 Apr 2008
Date of revision:
Handle: RePEc:cbt:econwp:08/06

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Related research

Keywords: Experimental economics; Outside option; Fairness;

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References

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  1. James Cox & Daniel Friedman & Steven Gjerstad, 2004. "A Tractable Model of Reciprocity and Fairness," Experimental 0406001, EconWPA.
  2. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Levine's Bibliography 784828000000000046, UCLA Department of Economics.
  3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
  4. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  5. Brandts, Jordi & Guth, Werner & Stiehler, Andreas, 2006. "I want YOU! An experiment studying motivational effects when assigning distributive power," Labour Economics, Elsevier, vol. 13(1), pages 1-17, February.
  6. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
  7. Charness, Gary & Haruvy, Ernan & Sonsino, Doron, 2007. "Social distance and reciprocity: An Internet experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 63(1), pages 88-103, May.
  8. Dufwenberg, Martin & Gneezy, Uri, 2000. "Measuring Beliefs in an Experimental Lost Wallet Game," Games and Economic Behavior, Elsevier, vol. 30(2), pages 163-182, February.
  9. James C. Cox & Cary A. Deck, 2005. "On the Nature of Reciprocal Motives," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 623-635, July.
  10. Brandts, Jordi & Sola, Carles, 2001. "Reference Points and Negative Reciprocity in Simple Sequential Games," Games and Economic Behavior, Elsevier, vol. 36(2), pages 138-157, August.
  11. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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Cited by:
  1. James C. Cox & Maros Servatka & Radovan Vadovic, 2009. "Saliency of Outside Options in the Lost Wallet Game," Experimental Economics Center Working Paper Series 2009-03, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.

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