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Analysis Tools Of Positional Investments And The Ultimatum Game

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  • Petr Mach
  • Jan Pokorný
  • Radim Valenčík

Abstract

This paper deals with the analysis of players' decision-making, using tools describing the role of positional investing. It discusses the differences between predicted and empirically observed decision- making in the ultimate game (UG). Empirically observed behavior has its rational basis in evaluating the bargaining position of future conflicts. We extend Nash's bargaining problem with a positional neutrality function. The positional neutrality function identifies an area of possible agreement in which one player's position in future games is not improved at the expense of the other. We used this analytical tool in a pilot UG experiment with 64 participants. We study the player's reactions in the experiment after adding additional information on future investment possibilities. Findings from the seven-rounded UG experiment support the predictive ability of positional neutrality functions. Hence, we assume that the “notion of fairness” can be explained as the “notion of positional neutral pay-off division.”

Suggested Citation

  • Petr Mach & Jan Pokorný & Radim Valenčík, 2023. "Analysis Tools Of Positional Investments And The Ultimatum Game," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 17(1), pages 166-180.
    • Handle: RePEc:isp:journl:v:17:y:2023:i:1:p:166-180
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    More about this item

    Keywords

    nash bargaining problem; game theory; ultimatum game; positional investment neutrality function;
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    JEL classification:

    • A - General Economics and Teaching

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