IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v154y2018icp60-74.html
   My bibliography  Save this article

Ultimatum game bargaining in a partially directed search market

Author

Listed:
  • Kloosterman, Andrew
  • Paul, Stephen

Abstract

We investigate a partially directed search and bargaining market with a laboratory experiment. First, sellers post intervals of possible surplus splits (i.e. the payoffs that would result from posting possible prices) that direct buyers to approach them. Second, after matching occurs, final surpluses are determined by ultimatum game bargaining. We investigate the interaction between bargaining and competition in the preliminary search stage, with a focus on how preferences for fair bargaining outcomes affect search. The main results confirm that behavior in the ultimatum game is consistent with preferences for fair outcomes, and the main effect on search is to drive up the posted buyer surplus lower bounds above the competitive equilibrium towards more equal surplus splits. Our main treatment variable is the number of buyers in the market, and when the number of buyers is increased, lower bounds and ultimatum offers to buyers decrease. This is consistent with fairness perceptions being influenced by competition.

Suggested Citation

  • Kloosterman, Andrew & Paul, Stephen, 2018. "Ultimatum game bargaining in a partially directed search market," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 60-74.
    • Handle: RePEc:eee:jeborg:v:154:y:2018:i:c:p:60-74
    DOI: 10.1016/j.jebo.2018.07.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268118301999
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2018.07.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, in: The Economics of Information and Uncertainty, pages 233-258, National Bureau of Economic Research, Inc.
    2. Güth, Werner & Kocher, Martin G., 2014. "More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 396-409.
    3. Fischbacher, Urs & Fong, Christina M. & Fehr, Ernst, 2009. "Fairness, errors and the power of competition," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 527-545, October.
    4. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    5. 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.
    6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    7. Nejat Anbarci & Nick Feltovich, 2013. "Directed Search, Coordination Failure, And Seller Profits: An Experimental Comparison Of Posted Pricing With Single And Multiple Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 873-884, August.
    8. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-1095, December.
    9. James Albrecht & Pieter A. Gautier & Susan Vroman, 2014. "Efficient Entry in Competing Auctions," American Economic Review, American Economic Association, vol. 104(10), pages 3288-3296, October.
    10. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    11. 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.
    12. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    13. Güth, W. & Marchand, N. & Rulliere, J.-L., 1997. "On the reliability of reprocal fairness -An experimental study-," SFB 373 Discussion Papers 1997,80, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    14. Andrew Kloosterman, 2016. "Directed search with heterogeneous firms: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 51-66, March.
    15. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    16. Dale T. Mortensen, 2005. "Wage Dispersion: Why Are Similar Workers Paid Differently?," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633191, December.
    17. Simon Gächter & Arno Riedl, 2005. "Moral Property Rights in Bargaining with Infeasible Claims," Management Science, INFORMS, vol. 51(2), pages 249-263, February.
    18. Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1996. "On Expectations and the Monetary Stakes in Ultimatum Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 25(3), pages 289-301.
    19. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
    20. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
    21. Timothy N. Cason & Charles Noussair, 2007. "A Market With Frictions In The Matching Process: An Experimental Study," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 665-691, May.
    22. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    23. Andrew Kloosterman, 2016. "Directed search with heterogeneous firms: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 51-66, March.
    24. Brit Grosskopf, 2003. "Reinforcement and Directional Learning in the Ultimatum Game with Responder Competition," Experimental Economics, Springer;Economic Science Association, vol. 6(2), pages 141-158, October.
    25. Nejat Anbarci & Nick Feltovich, 2014. "Pricing in competitive search markets: Experimental evidence of the roles of price information and fairness perceptions," Monash Economics Working Papers 55-14, Monash University, Department of Economics.
    26. Kyungmin Kim & Philipp Kircher, 2015. "Efficient Competition Through Cheap Talk: The Case of Competing Auctions," Econometrica, Econometric Society, vol. 83(5), pages 1849-1875, September.
    27. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-1454, September.
    28. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(1), pages 163-179.
    29. Helland, Leif & Moen, Espen R. & Preugschat, Edgar, 2017. "Information and coordination frictions in experimental posted offer markets," Journal of Economic Theory, Elsevier, vol. 167(C), pages 53-74.
    30. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    2. Derek Stacey, 2019. "Posted Prices, Search and Bargaining," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 85-104, July.
    3. Andrew Kloosterman, 2016. "Directed search with heterogeneous firms: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 51-66, March.
    4. Güth, Werner & Kocher, Martin G., 2014. "More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 396-409.
    5. Philipp E. Otto & Daniel Dittmer, 2019. "Simultaneous but independent ultimatum game: strategic elasticity or social motive dependency?," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(1), pages 61-80, March.
    6. Jeong, Dawoon & Sesmero, Juan Pablo & Reeling, Carson, 2023. "Experimental Evidence of Efficiency and Equity of Posted Price Markets for Irrigation Water," 2023 Annual Meeting, July 23-25, Washington D.C. 335840, Agricultural and Applied Economics Association.
    7. Jerez, Belén, 2014. "Competitive equilibrium with search frictions: A general equilibrium approach," Journal of Economic Theory, Elsevier, vol. 153(C), pages 252-286.
    8. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    9. Fischbacher, Urs & Fong, Christina M. & Fehr, Ernst, 2009. "Fairness, errors and the power of competition," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 527-545, October.
    10. Nejat Anbarci & Nick Feltovich, 2018. "Pricing in Competitive Search Markets: The Roles of Price Information and Fairness Perceptions," Management Science, INFORMS, vol. 64(3), pages 1101-1120, March.
    11. Peter Bußwolder & Swetlana Dregert & Peter Letmathe, 2019. "Consequences of Unfair Job Promotions in Organizations," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 71(1), pages 3-26, February.
    12. Breitmoser, Yves & Tan, Jonathan H.W., 2013. "Reference dependent altruism in demand bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 127-140.
    13. Eckel, Catherine & Gintis, Herbert, 2010. "Blaming the messenger: Notes on the current state of experimental economics," Journal of Economic Behavior & Organization, Elsevier, vol. 73(1), pages 109-119, January.
    14. Doğan, Gönül & van Assen, Marcel & Potters, Jan, 2013. "The effect of link costs on simple buyer–seller networks," Games and Economic Behavior, Elsevier, vol. 77(1), pages 229-246.
    15. Li, Shuwen & Houser, Daniel, 2022. "Stochastic bargaining in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 687-715.
    16. Philipp Kircher, 2007. "Efficiency of Directed Search," 2007 Meeting Papers 93, Society for Economic Dynamics.
    17. Armin Falk & Ernst Fehr & Urs Fischbacher, 2003. "On the Nature of Fair Behavior," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 20-26, January.
    18. Mangin, Sephorah, 2017. "A theory of production, matching, and distribution," Journal of Economic Theory, Elsevier, vol. 172(C), pages 376-409.
    19. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
    20. Julie Novakova & Jaroslav Flegr, 2013. "How Much Is Our Fairness Worth? The Effect of Raising Stakes on Offers by Proposers and Minimum Acceptable Offers in Dictator and Ultimatum Games," PLOS ONE, Public Library of Science, vol. 8(4), pages 1-9, April.

    More about this item

    Keywords

    Experimental economics; Directed search; Ultimatum game;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:154:y:2018:i:c:p:60-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.