Interpersonal comparisons of utility in bargaining : Evidence from a transcontinental Ultimatum Game

In this paper we present the results of a laboratory test of the "Transcontinental Ultimatum Game" implemented between India and France. The bargaining took the form of standard ultimatum games, but in one treatment Indian subjects made proposals to French subjects and in another treatment French subjects made proposals to Indian subjects. We observed that French->Indian bargaining mostly ended up with unequal splits of money in favour of French, while pretty equal splits were the most frequent outcome in Indian -> French interactions. The conceptual framework that we introduce to discuss the empirical evidence is a standard social reference norms model modified for taking into account the different marginal value of money of bargainers. Our explanation does not require the consideration of different cultural norms between France and India. It simply relies on relative standings comparisons between players, which occur in respect to the real earnings (that is monetary earnings corrected for a purchasing power factor) obtained in the game. Such norm is called local equity norm, and contrasted to a global equity norm which would encompasses the wealth of players beyond the game. According to what we observed, no beyond-game concern seems to be relevantly endorsed by subjects.