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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, Fujian Province, 361005, China)

  • J. Todd Swarthout

    ()

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

We conduct an experiment in which we auction the scarce rights to play the Proposer and Responder positions in subsequent ultimatum games. As a control treatment, we randomly allocate these rights and then charge exogenous participation fees according to the auction price sequences observed in the auction treatment. With endogenous selection into ultimatum games via auctions, we find that play converges to a session-specific Nash equilibrium and auction prices emerge which support this equilibrium by the principle of forward induction. With random assignment and exogenous participation fees, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. The Nash equilibrium observed within a session results in low ultimatum game offers, but the subgame perfect Nash equilibrium is never observed.

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File URL: http://feel.xmu.edu.cn/RePEc/wpaper/Auctioning_the_Right_to_Play_Ultimatum_Games_and_the_Impact_on_Equilibrium_Selection.pdf
File Function: 2013
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Paper provided by Xiamen Unversity, The Wang Yanan Institute for Studies in Economics, Finance and Economics Experimental Laboratory in its series Working Papers with number 1301.

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Length: 21 pages
Date of creation: 28 Mar 2013
Date of revision: 28 Mar 2013
Handle: RePEc:fee:wpaper:1301
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  1. Cachon, Gerard P & Camerer, Colin F, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 165-94, February.
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  3. Steffen Andersen & Seda Ertac & Uri Gneezy & Moshe Hoffman & John A. List, 2011. "Stakes Matter in Ultimatum Games," American Economic Review, American Economic Association, vol. 101(7), pages 3427-39, December.
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  12. Bruno Broseta & Enrique Fatas & Tibor Neugebauer, 2003. "Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 574-591, October.
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  14. Werner Güth & Martin G. Kocher, 2013. "More than thirty years of ultimatum bargaining experiments: Motives, variations, and a survey of the recent literature," Jena Economic Research Papers 2013-035, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
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  16. David Cooper & Nick Feltovich & Alvin Roth & Rami Zwick, 2003. "Relative versus Absolute Speed of Adjustment in Strategic Environments: Responder Behavior in Ultimatum Games," Experimental Economics, Springer, vol. 6(2), pages 181-207, October.
  17. David Cooper & E. Dutcher, 2011. "The dynamics of responder behavior in ultimatum games: a meta-study," Experimental Economics, Springer, vol. 14(4), pages 519-546, November.
  18. Edward P. Lazear & Ulrike Malmendier & Roberto A. Weber, 2012. "Sorting in Experiments with Application to Social Preferences," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 136-63, January.
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