IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Ecologies of Preferences with Envy as an Antidote to Risk-Aversion in Bargaining

  • Nitai Bergman

    ()

  • Yaacov Bergman

    ()

Registered author(s):

    Models have been put forward recently that seem to be successful in explaining apparently anomalous experimental results in the Ultimatum Game, where responders reject positive offers. While imparting fixed preference orders to fully rational agents, these models depart from traditional models by assuming preferences that take account not only of the material payoff to oneself, but also of that which is given to others. However, they leave open the question of how an agent’s economic survival is helped by a preference order that advises him to leave money on the table. Our answer is that, indeed, doing so does not help. But that the same envious preference order that ill advises in some circumstances to reject an “insultingly” small offer, advises well in other circumstances, when it helps the same agent to overcome his risk-aversion and to offer a risky, tough offer that yields him a higher expected dollar gain. We show the existence of population distributions where the two effects exactly balance out across different preference types. These distributions are asymptotically stable, stationary, and inefficient, in which different preferences are represented, and where, as commonly observed in an Ultimatum Game, positive offers are made, of which some are rejected with positive probability. Our theory yields new testable hypotheses.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://ratio.huji.ac.il/sites/default/files/publications/dp322.pdf
    Download Restriction: no

    Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp322.

    as
    in new window

    Length: 44 pages
    Date of creation: Apr 2000
    Date of revision: Nov 2001
    Handle: RePEc:huj:dispap:dp322
    Contact details of provider: Postal: Feldman Building - Givat Ram - 91904 Jerusalem
    Phone: +972-2-6584135
    Fax: +972-2-6513681
    Web page: http://www.ratio.huji.ac.il/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
    2. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
    3. S. Huck & J. Oechssler, 1996. "The Indirect Evolutionary Approach To Explaining Fair Allocations," SFB 373 Discussion Papers 1996,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    4. Murnighan, J Keith & Roth, Alvin E & Schoumaker, Francoise, 1988. " Risk Aversion in Bargaining: An Experimental Study," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 101-24, March.
    5. Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998. "Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study," Levine's Working Paper Archive 344, David K. Levine.
    7. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
    8. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
    9. Eckel, Catherine C & Grossman, Philip J, 2001. "Chivalry and Solidarity in Ultimatum Games," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 171-88, April.
    10. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    11. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, June.
    12. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    13. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
    14. Merton, Robert C. & Samuelson, Paul A., 1974. "Fallacy of the log-normal approximation to optimal portfolio decision-making over many periods," Journal of Financial Economics, Elsevier, vol. 1(1), pages 67-94, May.
    15. Gary E. Bolton & Rami Zwick & Elena Katok, 1998. "Dictator game giving: Rules of fairness versus acts of kindness," International Journal of Game Theory, Springer, vol. 27(2), pages 269-299.
    16. Guth, Werner, 1995. "On ultimatum bargaining experiments -- A personal review," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 329-344, August.
    17. repec:att:wimass:9325 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:huj:dispap:dp322. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilan Nehama)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.