Inefficiency and Social Exclusion in a Coalition Formation Game
This paper reports the results of experiments involving a 3-person coalition formation game with an ultimatum bargaining character. The grand coalition was always the efficient coalition decision, whereas the values of the 2-person coalitions are varied such that they lead to an efficiency loss in the range of 6.7 up to 30 percent. Furthermore, the 2-person coalition implies social exclusion, since the not chosen member always receives a payoff of zero. Consistent with results reported in the literature on 2- person ultimatum bargaining experiments, negative reciprocity (i.e. punishment of unfair offers) plays a crucial role in decision making. The hypothesis that selfishness and anticipated negative reciprocity by proposers together with actual negative reciprocal behavior of responders lead to inefficient outcomes and social exclusion is strongly supported by the data. It turns out that a huge majority of proposers choose the inefficient and unfair 2-person coalition. Proposer-induced efficiency losses vary between 5 and 20 percent, and one sixth to almost one third of the population is excluded from participation.
|Date of creation:||Apr 1999|
|Date of revision:|
|Contact details of provider:|| Postal: Josefstädterstr. 39, A-1080 Vienna, Austria|
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at
More information through EDIRC
|Order Information:|| Postal: Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria|
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.:
- Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1998.
"Gift exchange and reciprocity in competitive experimental markets,"
ULB Institutional Repository
2013/5909, ULB -- Universite Libre de Bruxelles.
- Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1998. "Gift exchange and reciprocity in competitive experimental markets," European Economic Review, Elsevier, vol. 42(1), pages 1-34, January.
- Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1995. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Economics Series 14, Institute for Advanced Studies.
- Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 2003. "Gift Exchange and Reciprocity in Competitive Experimental Markets," Labor and Demography 0305002, EconWPA.
- Schotter, Andrew & Weigelt, Keith & Wilson, Charles, 1990.
"A Laboratory Investigation Of Multi-Person Rationality And Presentation Effects,"
90-24, C.V. Starr Center for Applied Economics, New York University.
- Schotter Andrew & Weigelt Keith & Wilson Charles, 1994. "A Laboratory Investigation of Multiperson Rationality and Presentation Effects," Games and Economic Behavior, Elsevier, vol. 6(3), pages 445-468, May.
- Elizabeth Hoffman & Matthew Spitzer, 1981.
"The Coase Theorem: Some Experimental Tests,"
470, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
- Ernst Fehr & Georg Kirchsteiger & Arno Riedl, 1993.
"Does Fairness Prevent Market Clearing? An Experimental Investigation,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 108(2), pages 437-459.
- Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
- Georg Kirchsteiger & Ernst Fehr & Simon Gächter, 1997.
"Reciprocity as a contract enforcement device: experimental evidence,"
ULB Institutional Repository
2013/5911, ULB -- Universite Libre de Bruxelles.
- Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
- Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
- 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.
- Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December.
- Guth, Werner & Tietz, Reinhard, 1990. "Ultimatum bargaining behavior : A survey and comparison of experimental results," Journal of Economic Psychology, Elsevier, vol. 11(3), pages 417-449, September.
When requesting a correction, please mention this item's handle: RePEc:ihs:ihsesp:64. 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: (Doris Szoncsitz)
If references are entirely missing, you can add them using this form.