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Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection

  • Jason Shachat


    (Wang Yanan Institute for Studies in Economics (WISE) and the MOE Key Laboratory in Econometrics, Xiamen University, Xiamen 361005, Fujian, China)

  • J. Todd Swarthout


    (Department of Economics, Georgia State University, Atlanta, GA 30303, USA)

We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is.

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Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 4 (2013)
Issue (Month): 4 (November)
Pages: 738-753

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Handle: RePEc:gam:jgames:v:4:y:2013:i:4:p:738-753:d:30826
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