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Bargaining and inequity aversion: On the efficiency of the double auction

  • Rasch, Alexander
  • Wambach, Achim
  • Wiener, Kristina

In a bargaining setting with asymmetrically informed, inequity-averse parties, a fully efficient mechanism (i.e., the double auction) exists if and only if compassion is strong. Less compassionate parties do not trade in the double auction in the limit of strong envy.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 114 (2012)
Issue (Month): 2 ()
Pages: 178-181

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Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:178-181
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Christian Ewerhart, . "The Effect of Sunk Costs on the Outcome of Alternating-Offers Bargaining between Inequity-Averse Agents," IEW - Working Papers 203, Institute for Empirical Research in Economics - University of Zurich.
  2. Giuseppe Lopomo & Efe A Ok, 2001. "Bargaining, Interdependence and the Rationality of Fair Division," Levine's Working Paper Archive 563824000000000114, David K. Levine.
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  4. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  5. Bartling, Björn & von Siemens, Ferdinand A., 2010. "The intensity of incentives in firms and markets: Moral hazard with envious agents," Labour Economics, Elsevier, vol. 17(3), pages 598-607, June.
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  7. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  8. Maria Montero, 2007. "Inequity Aversion May Increase Inequity," Economic Journal, Royal Economic Society, vol. 117(519), pages C192-C204, 03.
  9. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, 03.
  10. Kragl, Jenny & Schmid, Julia, 2009. "The impact of envy on relational employment contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 766-779, November.
  11. 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.
  12. Peter B. Linhart, 2001. "original papers : Bargaining solutions with non-standard objectives," Review of Economic Design, Springer, vol. 6(2), pages 225-239.
  13. von Siemens, Ferdinand A., 2009. "Bargaining under incomplete information, fairness, and the hold-up problem," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 486-494, August.
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