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Investment and Ultimatum Games: Experiments

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  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

  • Toshihiko Shima

    (Graduate School of Economics, University of Tokyo)

Abstract

This paper examines the ultimatum game preceded by a single player's investment decision that is risky in that the business opportunity could fail to be discovered. The experiment's results show that the functioning of social preference connecting the baseline ultimatum game with the investment crucially depends on the model's specifications, such as whether the proposer or the responder is the investor or the riskiness of the investment. The noninvestor/proposer tends to act in consideration of the efficiency of the investment, but not its riskiness. Such tendencies of the noninvestor's/proposer's social preferences are diametrically opposite to that of the investor/proposer.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2011/2011cf790.pdf
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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-790.

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Length: 57 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:tky:fseres:2011cf790

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  1. Hackett, Steven C, 1994. "Is Relational Exchange Possible in the Absence of Reputations and Repeated Contact?," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 360-89, October.
  2. Bengt Holmstrom & John Roberts, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall.
  3. Fehr, Ernst & Kremhelmer, Susanne & Schmidt, Klaus M., 2008. "Fairness and the optimal allocation of ownership rights," Munich Reprints in Economics 20626, University of Munich, Department of Economics.
  4. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
  5. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  6. 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.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, September.
  8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  9. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
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