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Inequity Aversion May Increase Inequity

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  • Maria Montero

    (University of Nottingham)

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 due to the analogy between inequity aversion and risk aversion. Inequity aversion may also affect comparative statics: the advantage of being proposer can decrease as players become more impatient.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.80.

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Date of creation: May 2006
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Handle: RePEc:fem:femwpa:2006.80

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Keywords: Noncooperative Bargaining; Coalition Formation; Inequity Aversion;

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References

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  1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 817-868, August.
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  3. Frechette, Guillaume & Kagel, John H. & Morelli, Massimo, 2005. "Nominal bargaining power, selection protocol, and discounting in legislative bargaining," Journal of Public Economics, Elsevier, Elsevier, vol. 89(8), pages 1497-1517, August.
  4. 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.
  5. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, Elsevier, vol. 16(1), pages 97-108, September.
  6. 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, Springer, vol. 3(2), pages 135-54, June.
  7. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1068-95, December.
  8. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer, Springer, vol. 4(3), pages 203-219, December.
  9. William Neilson, 2006. "Axiomatic reference-dependence in behavior toward others and toward risk," Economic Theory, Springer, Springer, vol. 28(3), pages 681-692, 08.
  10. Kalandrakis, Anastassios, 2004. "A three-player dynamic majoritarian bargaining game," Journal of Economic Theory, Elsevier, Elsevier, vol. 116(2), pages 294-322, June.
  11. Montero, Maria, 2006. "Noncooperative foundations of the nucleolus in majority games," Games and Economic Behavior, Elsevier, Elsevier, vol. 54(2), pages 380-397, February.
  12. Okada, Akira & Riedl, Arno, 2005. "Inefficiency and social exclusion in a coalition formation game: experimental evidence," Games and Economic Behavior, Elsevier, Elsevier, vol. 50(2), pages 278-311, February.
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Citations

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Cited by:
  1. Breitmoser, Yves & Tan, Jonathan H.W., 2011. "Ultimata bargaining: generosity without social motives," MPRA Paper 33613, University Library of Munich, Germany.
  2. Maria Montero, 2005. "Altruism, Spite and Competition in Bargaining Games," Game Theory and Information, EconWPA 0512004, EconWPA.
  3. 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, Springer, vol. 41(3), pages 623-649, August.
  4. Breitmoser, Yves & Tan, Jonathan H.W., 2014. "Reference Dependent Altruism," MPRA Paper 52774, University Library of Munich, Germany.
  5. 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, European University Institute ECO2010/37, European University Institute.
  6. John Duffy & Félix Muñoz-García, 2012. "Patience or Fairness? Analyzing Social Preferences in Repeated Games," Games, MDPI, Open Access Journal, MDPI, Open Access Journal, vol. 3(1), pages 56-77, March.
  7. Yves Breitmoser, 2011. "Parliamentary bargaining with priority recognition for committee members," Social Choice and Welfare, Springer, Springer, vol. 37(1), pages 149-169, June.
  8. Breitmoser, Yves & Tan, Jonathan H.W., 2010. "Generosity in bargaining: Fair or fear?," MPRA Paper 27444, University Library of Munich, Germany.
  9. Stefan Kohler, 2012. "Incomplete Information about Social Preferences Explains Equal Division and Delay in Bargaining," Games, MDPI, Open Access Journal, MDPI, Open Access Journal, vol. 3(3), pages 119-137, September.
  10. Breitmoser, Yves & Tan, Jonathan H.W., 2013. "Reference dependent altruism in demand bargaining," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 92(C), pages 127-140.
  11. Michalis Drouvelis & Maria Montero & Martin Sefton, . "Gaining Power through Enlargement: Strategic Foundations and Experimental Evidence," Discussion Papers, Department of Economics, University of York 09/30, Department of Economics, University of York.
  12. Kohler, Stefan, 2012. "Envy can promote more equal division in alternating-offer bargaining," MPRA Paper 40761, University Library of Munich, Germany.
  13. Rasch, Alexander & Wambach, Achim & Wiener, Kristina, 2012. "Bargaining and inequity aversion: On the efficiency of the double auction," Economics Letters, Elsevier, Elsevier, vol. 114(2), pages 178-181.
  14. Kohler, Stefan, 2013. "Inequality aversion causes equal or unequal division in alternating-offer bargaining," MPRA Paper 40764, University Library of Munich, Germany.

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