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An empirical study of determinants in decision-making process

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  • Aurélie Bonein

Abstract

This paper presents a new social utility model, which highlights determinants in decision-making process when individuals are in strategic interactions by means of take-it-or-leave-it offer. In our model, the decision-maker seeks to maximize her utility function which depends both on her monetary payoff and payoffs differences between all individuals. We confront the predictions of our model with experimental regularities. We model decisions of player with a veto power by a dummy variable. In particular, we test the assumptions of the model with data obtained in a previous three-player dictator-ultimatum game experiment (Bonein, Serra, 2004). Regression and stepwise procedure allow us to confirm importance of personal payoff and existence of disadvantageous inequality aversion. However, our results dispute advantageous inequality aversion proposed by Fehr, Schmidt (1999). Moreover, advantageous inequality between others players becomes relevant. This last motivation was forgotten in inequality aversion models. This model decreases the importance of fairness motivation in rejection of positive offer. We show that motivation can be selfishness: the decision-maker seeks to maximize a particular utility function.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2006-10.pdf
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Bibliographic Info

Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 06-10.

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Length: 31 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
Handle: RePEc:lam:wpaper:06-10

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  1. Jordi Brandts & Gary Charness, 1998. "Hot vs. cold: Sequential responses and preference stability in experimental games," Economics Working Papers 321, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Hill, Sarah A. & Neilson, William, 2007. "Inequality aversion and diminishing sensitivity," Journal of Economic Psychology, Elsevier, vol. 28(2), pages 143-153, April.
  3. Dufwenberg, Martin & Kirchsteiger, Georg, 2004. "A theory of sequential reciprocity," Games and Economic Behavior, Elsevier, vol. 47(2), pages 268-298, May.
  4. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  5. Gary Bolton & Axel Ockenfels, 2005. "A stress test of fairness measures in models of social utility," Economic Theory, Springer, vol. 25(4), pages 957-982, 06.
  6. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  7. Bonein, Aurélie & Serra, Daniel, 2007. "Another experimental look at reciprocal behavior: indirect reciprocity," MPRA Paper 3257, University Library of Munich, Germany, revised Mar 2007.
  8. Armin Falk & Urs Fischbacher, . "A Theory of Reciprocity," IEW - Working Papers 006, Institute for Empirical Research in Economics - University of Zurich.
  9. 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.
  10. Stefan Kohler, 2005. "Fairness vs. Social Welfare in Experimental Decisions," Economics Working Papers ECO2005/11, European University Institute.
  11. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  12. Bethwaite, Judy & Tompkinson, Paul, 1996. "The ultimatum game and non-selfish utility functions," Journal of Economic Psychology, Elsevier, vol. 17(2), pages 259-271, April.
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