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Revealing Preferences for Fairness in Ultimatum Bargaining

  • James Andreoni
  • Marco Castillo
  • Ragan Petrie

The ultimatum game has been the primary tool for studying bargaining behavior in recent years. However, not enough information is gathered in the ultimatum game to get a clear picture of respondersâ?? utility functions. We analyze a convex ultimatum game in which respondersâ?? can â??shrinkâ?� an offer as well as to accept or reject it. This allows us to observe enough about respondersâ?? preferences to estimate utility functions. We then successfully use data collected from convex ultimatum games to predict behavior in standard games. Our analysis reveals that rejections can be â??rationalizedâ?� with neo-classical preferences over own- and other-payoff that are convex, nonmonotonic, and regular. These findings present a precise benchmark for models of fairness and bargaining.

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Paper provided by Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University in its series Experimental Economics Center Working Paper Series with number 2006-21.

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Length: 31
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:exc:wpaper:2006-21
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