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Bargaining, Interdependence and the Rationality of Fair Division

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  • Giuseppe Lopomo
  • Efe A Ok

Abstract

We consider two-person bargaining games with interdependent preferences and bilateral incomplete information. We show that in both the ultimatum game and the two-stage alternating-offers game, our equilibrium predictions are consistent with a number of robust experimental regularities that falsify the standard game theoretic model: occurrence of disagreements, disadvantageous counteroffers, and outcomes that come close to the equal split of the pie. In the context of infinite-horizon bargaining, the implications of the model pertaining to fair outcomes is even stronger. In particular, the Coase property in our case generates "almost" 50-50 splits of the pie, almost immediately. The present approach thus provides a positive theory for the frequently encountered phenomenon of the 50-50 division of the gains from trade. Copyright 2001 by the RAND Corporation.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

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  • Giuseppe Lopomo & Efe A Ok, 2001. "Bargaining, Interdependence and the Rationality of Fair Division," Levine's Working Paper Archive 563824000000000114, David K. Levine.
    • Handle: RePEc:cla:levarc:563824000000000114
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    References listed on IDEAS

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    Cited by:

    1. Rasch, Alexander & Wambach, Achim & Wiener, Kristina, 2012. "Bargaining and inequity aversion: On the efficiency of the double auction," Economics Letters, Elsevier, vol. 114(2), pages 178-181.
    2. Cox, Caleb A., 2013. "Inequity aversion and advantage seeking with asymmetric competition," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 121-136.
    3. Hasan, Hamid & Ejaz, Nauman, 2013. "Testing for Differences across Genders: A Replication of Ultimatum Game at International Islamic University, Islamabad," MPRA Paper 44923, University Library of Munich, Germany.
    4. Shreekant Gupta, 2000. "Incentive-Based Approaches for Mitigating Greenhouse Gas Emissions: Issues and Prospects for India," Working papers 85, Centre for Development Economics, Delhi School of Economics.
    5. Carmen Marchiori, 2010. "Concern for Fairness and Incentives in Water Negotiations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 553-571, April.
    6. Sigbjørn Birkeland & Bertil Tungodden, 2014. "Fairness motivation in bargaining: a matter of principle," Theory and Decision, Springer, vol. 77(1), pages 125-151, June.
    7. Mark A. Jamison, 2004. "Effects of Industry Concentration on Quality Choices for Network Connectivity," Working Papers 04-08, NET Institute.
    8. Shyh-fang Ueng, 2005. "A theory of efficient coexistence," International Economic Journal, Taylor & Francis Journals, vol. 19(3), pages 397-416.
    9. Shreekant Gupta, 2010. "Incentive Based Approaches for Mitigating Greenhouse Gas Emmissions : Issues And Prospects for India," Working Papers id:2638, eSocialSciences.
    10. Barry Feldman, 2005. "Lost in Translation? Basis Utility and Proportionality in Games," Game Theory and Information 0507001, EconWPA, revised 28 Feb 2006.

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