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Why do People Veto? An Experimental Analysis of the Valuation and the Consequences of Varying Degrees of Veto Power

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  • Werner Güth
  • Judit Kóvaczs

Abstract

By vetoing one questions mutually efficient agreements. On the other hand the threat of vetoing may prevent exploitation. Based on a generalization of ultimatum bargaining (Suleiman, 1996) we first elicit the responders' certainty equivalents for three different degrees of veto power. Afterwards the corresponding bargaining rule is implemented. The experimental data reveal that proposers are afraid of more veto power but that responders only care for commanding veto power at all, not for its strength.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 308.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_308

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  1. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  2. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1812, C.E.P.R. Discussion Papers.
  3. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1325-48, December.
  4. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  5. Kirchsteiger, Georg, 1994. "The role of envy in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 25(3), pages 373-389, December.
  6. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, Elsevier, vol. 8(1), pages 164-212.
  7. Suleiman, Ramzi, 1996. "Expectations and fairness in a modified Ultimatum game," Journal of Economic Psychology, Elsevier, Elsevier, vol. 17(5), pages 531-554, November.
  8. Binmore, K. & Samuelson, L., 1993. "An Economist's Perspective on the Evolution of Norms," Working papers, Wisconsin Madison - Social Systems 9323, Wisconsin Madison - Social Systems.
  9. V. Prasnikar & A. Roth, 1998. "Considerations of fairness and strategy: experimental data from sequential games," Levine's Working Paper Archive 451, David K. Levine.
  10. Bolle, Friedel, 1990. "High reward experiments without high expenditure for the experimenter?," Journal of Economic Psychology, Elsevier, Elsevier, vol. 11(2), pages 157-167, June.
  11. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 166-193, March.
  12. Frank, Bjorn, 1996. "The use of internal games: The case of addiction," Journal of Economic Psychology, Elsevier, Elsevier, vol. 17(5), pages 651-660, November.
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