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Self-Serving Use of Equity Rules in Bargaining with Asymmetric Outside Options

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  • Irlenbusch, Bernd
  • Hennig-Schmidt, Heike
  • Rilke, Rainer
  • Walkowitz, Gari

Abstract

We experimentally investigate the relevance of (asymmetric) outside options in ultimatum bargaining. Building on the generalized equity principle formulated by Selten (1978) we derive three di erent equity rules. These equity rules can explain 43% of all o ers. Our within-subject design allows us to show that proposers apply the equity rules in a self-serving manner, i.e., proposers tend to follow the rules that suggest the highest payo for them. This tendency leads to high ine ciencies due to frequent rejections. --

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79975.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79975

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