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An Experimental Study on Dividing Gains through Politics

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  • Li-Chen Hsu
  • Kamhon Kan
  • C.C. Yang
  • Chun-Lei Yang

Abstract

type="main" xml:id="sjpe12084-abs-0001"> This article offers experimental evidence to examine an important case in politics where a monopolistic proposer seeks a majority's consent from competitive responders to split the gain. The unique subgame perfect equilibrium prediction is that the side of trade with a monopoly will exploit the side of trade with competition to reap almost all of the gain. Our experimental evidence reveals that while responders do compete with each other to race to the bottom (consistent with the prediction), the monopolistic proposer settles down to offer a ‘fair’ share of the pie to those from whom he or she seeks majority support (contrary to the prediction).

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  • Li-Chen Hsu & Kamhon Kan & C.C. Yang & Chun-Lei Yang, 2015. "An Experimental Study on Dividing Gains through Politics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(5), pages 546-566, November.
    • Handle: RePEc:bla:scotjp:v:62:y:2015:i:5:p:546-566
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