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Interpersonal Comparisons of Utility in Bargaining: Evidence from a Transcontinental Ultimatum Game

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Author Info

  • Romina Boarini

    (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)

  • Jean-Francois Laslier

    ()
    (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)

  • Stéphane Robin

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

Abstract

This paper presents the experimental results of a “Transcontinental Ultimatum Game” implemented between India and France. The bargaining took the form of standard ultimatum games, but in one treatment Indian subjects made offers to French subjects and, in another treatment, French subjects made offers to Indian subjects. We observed that French→Indian bargaining mostly ended up with unequal splits of money in favour of French, while nearly equal splits were the most frequent outcome in Indian→French interactions. The experimental results are organized through a standard social reference model, modified for taking into account the different marginal value of money for bargainers. In our model bargaining is driven by relative standings comparisons between players, occurring in terms of real earnings (that is monetary earnings corrected for a purchasing power factor) obtained in the game. The norm of equity behind the equalization of real earnings is called local equity norm, and contrasted to a global equity norm which would encompass the wealth of players beyond the game. According to what we observed, no beyond-game concern seems to be relevantly endorsed by subjects.

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Paper provided by HAL in its series Working Papers with number halshs-00104668.

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Date of creation: 09 Oct 2006
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Handle: RePEc:hal:wpaper:halshs-00104668

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Keywords: Interpersonal Comparisons of Utility; Fairness; Bargaining experiment; Ultimatum Game;

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References

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  1. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 3(4), pages 367-388, December.
  2. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  3. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  4. 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.
  5. Ernst Fehr & Joseph Henrich & Robert Boyd, 2003. "In Search of Homo Economicus: Behavioral Experiments in 15 Small- Scale Societies," Microeconomics, EconWPA 0305009, EconWPA.
  6. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Dufwenberg, M. & Kirchsteiger, G., 1998. "A Theory of Sequential Reciprocity," Discussion Paper, Tilburg University, Center for Economic Research 1998-37, Tilburg University, Center for Economic Research.
  8. Kirchsteiger, Georg, 1994. "The role of envy in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 25(3), pages 373-389, December.
  9. 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.
  10. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, Econometric Society, vol. 70(2), pages 737-753, March.
  11. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics, University of Munich, Department of Economics 20650, University of Munich, Department of Economics.
  12. Hessel Oosterbeek & Randolph Sloof & Gijs van de Kuilen, 2004. "Cultural differences in ultimatum game experiments: Evidence from a meta-analysis," Experimental, EconWPA 0401003, EconWPA.
  13. Tyran, Jean-Robert, 2003. "Behavioral Game Theory. Experiments in Strategic Interaction: Colin F. Camerer, Princeton University Press, Princeton, New Jersey, 2003, p. 550, Price $65.00/[UK pound]42.95, ISBN 0-691-09039-4," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 32(6), pages 717-720, December.
  14. Elster, Jon, 1991. "Local justice : How institutions allocate scarce goods and necessary burdens," European Economic Review, Elsevier, Elsevier, vol. 35(2-3), pages 273-291, April.
  15. Guth, Werner, 1995. "On ultimatum bargaining experiments -- A personal review," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 27(3), pages 329-344, August.
  16. Kagel, John H. & Kim, Chung & Moser, Donald, 1996. "Fairness in Ultimatum Games with Asymmetric Information and Asymmetric Payoffs," Games and Economic Behavior, Elsevier, Elsevier, vol. 13(1), pages 100-110, March.
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Cited by:
  1. Werner Güth & Martin G. Kocher, 2013. "More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature," Jena Economic Research Papers 2013-035, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Gari Walkowitz & Clemens Oberhammer & Heike Hennig-Schmidt, 2004. "Experimenting over a Long Distance - A method to facilitate intercultural experiments," Bonn Econ Discussion Papers, University of Bonn, Germany bgse17_2004, University of Bonn, Germany, revised Dec 2005.

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