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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. Englmaier, Florian & Wambach, Achim, 2005. "Optimal Incentive Contracts under Inequity Aversion," IZA Discussion Papers 1643, Institute for the Study of Labor (IZA).
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  5. Lopomo, Giuseppe & Ok, Efe A, 2001. "Bargaining, Interdependence, and the Rationality of Fair Division," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 263-83, Summer.
  6. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  7. Pedro Rey Biel, 2004. "Inequity aversion and team incentives," Microeconomics 0407009, EconWPA.
  8. Bartling, Björn & Siemens, Ferdinand von, 2006. "The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents," Discussion Papers in Economics 913, University of Munich, Department of Economics.
  9. 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.
  10. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, 03.
  11. 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.
  12. 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.
  13. Maria Montero, 2006. "Inequity Aversion May Increase Inequity," Working Papers 2006.80, Fondazione Eni Enrico Mattei.
  14. 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.
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