Bounded Rationality in Bargaining Games: Do Proposers Believe That Responders Reject an Equal Split?
AbstractPuzzled by the experimental results of the 'impunity game' by Bolton and Zwick (1995) we replicate the game and alter it in a systematic manner. We find that although almost nobody actually rejects an offered equal split in a bargaining game, proposers behave as if there would be a considerably large rejection rate for equal splits. This result is inconsistent with existing models of economic decision making. This includes models of selfish players as well as models of social utility and reciprocity, even when combined with erroneous decision making. Our data suggests that subjects fail to foresee their opponent's decision even for one step in our simple bargaining games. We consider models of bounded rational decision making such as rules of thumb as explanations for the observed behavioral pattern.
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Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 11.
Length: 24 pages
Date of creation: 19 Jun 2004
Date of revision:
ultimatum game; dictator game; impunity game; social utility; bounded rationality;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D3 - Microeconomics - - Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-22 (All new papers)
- NEP-CBE-2004-06-22 (Cognitive & Behavioural Economics)
- NEP-EVO-2004-06-22 (Evolutionary Economics)
- NEP-EXP-2004-06-22 (Experimental Economics)
- NEP-MIC-2004-06-22 (Microeconomics)
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