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Ultimata bargaining: generosity without social motives

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  • Breitmoser, Yves
  • Tan, Jonathan H.W.

Abstract

We show and explain how generosity beyond that explainable by social preferences can manifest in bargaining. We analyze an ultimata game with two parties vying to coalesce with a randomly chosen proposer. They simultaneously demand shares of the surplus. The proposer must then make an offer that meets at least one demand, or else the game either continues with a new round or breaks down with all earning zero. Self-interest, altruism, and inequity aversion univocally predict miniscule demands due to inter-party competition; proposers thus obtain the lion's share. We experimentally observe that proposers coalesce with the less demanding party by strategically matching demands, like ultimatum bargaining, but also give non-strategically to the other party, like dictator giving. The observations are incompatible with concave utilities, as implied by social preferences, but are compatible with reference dependent preferences.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33613.

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Date of creation: 22 Sep 2011
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Handle: RePEc:pra:mprapa:33613

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Keywords: demand commitment; ultimata bargaining; non-cooperative; laboratory experiment; social preferences; reference dependence;

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