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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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File URL: http://www.sciencedirect.com/science/article/pii/S0165176511003569
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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
DOI: 10.1016/j.econlet.2011.09.027
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Pedro Rey-Biel, 2007. "Inequity Version and Team Incentives," UFAE and IAE Working Papers 677.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Giuseppe Lopomo & Efe A Ok, 2001. "Bargaining, Interdependence and the Rationality of Fair Division," Levine's Working Paper Archive 563824000000000114, David K. Levine.
  3. Bartling, Björn & Siemens, Ferdinand von, 2007. "Equal Sharing Rules in Partnerships," Discussion Papers in Economics 2027, University of Munich, Department of Economics.
  4. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  5. Grund, Christian & Sliwka, Dirk, 2002. "Envy and Compassion in Tournaments," IZA Discussion Papers 647, Institute for the Study of Labor (IZA).
  6. Christian Ewerhart, 2006. "The Effect of Sunk Costs on the Outcome of Alternating-Offers Bargaining Between Inequity-Averse Agents," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 58(2), pages 184-203, April.
  7. Bartling, Björn & Siemens, Ferdinand von, 2006. "The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 115, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Tore Ellingsen & Magnus Johannesson, 2004. "Promises, Threats and Fairness," Economic Journal, Royal Economic Society, vol. 114(495), pages 397-420, 04.
  9. Maria Montero, 2006. "Inequity Aversion May Increase Inequity," Working Papers 2006.80, Fondazione Eni Enrico Mattei.
  10. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  11. 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.
  12. 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.
  13. 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.
  14. Peter B. Linhart, 2001. "original papers : Bargaining solutions with non-standard objectives," Review of Economic Design, Springer;Society for Economic Design, vol. 6(2), pages 225-239.
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