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The Ultimatum Game: Optimal Strategies without Fairness

  • Burnell, Stephen J.
  • Evans, Lewis
  • Yao, Shuntian

The Ultimatum game is simple and this facilitates its use in the study of predictions of game theory. Experimental evidence suggests that it doesnot predict individual behavior well unless individuals gain welfarefrom fairness in transactions or have expectations about some widergame. Our model excludes any notion of fairness by including (potential)rivalry in transactions. In this game the proposer's expectations yieldoutcomes that are consistent with experimental evidence. Offers can belarge or small with none in an intermediate range. The consequent distribution appears in Dictator game experiments. Our model explains how it is generated by expectations.

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File URL: http://www.sciencedirect.com/science/article/B6WFW-45JC97N-R/2/48275778b7657a8c6e1a4d1fbaf024e3
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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 26 (1999)
Issue (Month): 2 (January)
Pages: 221-252

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Handle: RePEc:eee:gamebe:v:26:y:1999:i:2:p:221-252
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June.
  2. G. Bolton, 2010. "A comparative model of bargaining: theory and evidence," Levine's Working Paper Archive 263, David K. Levine.
  3. J. Ochs & Alvin E. Roth, 1998. "An experimental study of sequential bargaining," Levine's Working Paper Archive 331, David K. Levine.
  4. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
  5. Croson, Rachel T. A., 1996. "Information in ultimatum games: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 197-212, August.
  6. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
  7. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  8. Straub, Paul G. & Murnighan, J. Keith, 1995. "An experimental investigation of ultimatum games: information, fairness, expectations, and lowest acceptable offers," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 345-364, August.
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