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Information, Uncertainty, and Subjective Entitlements in Bargaining

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  • Karagozoglu, Emin

    (Bilkent University)

  • Riedl, Arno

    (Maastricht University)

Abstract

More often than not production processes are the joint endeavor of people having different abilities and productivities. Such production processes and the associated surplus production are often not fully transparent in the sense that the relative contributions of involved agents are blurred; either by lack of information about the actual performance of collaborators or because of random noise in the production process or both. These variables likely influence the surplus sharing negotiations following the production. By means of a laboratory experiment, we systematically investigate their role for the whole bargaining process from opening offers to (dis)agreements and find that uncertainties in surplus production and (even) a very coarse performance information lead to bargaining asymmetries. In addition, we find that bargainers' subjective entitlements are also influenced by performance information and the randomness inherent in the production process. These differences in subjective entitlements together with the differences in entitlements between better and worse performers influence the whole bargaining process and significantly contribute to the differences in bargaining outcomes.

Suggested Citation

  • Karagozoglu, Emin & Riedl, Arno, 2010. "Information, Uncertainty, and Subjective Entitlements in Bargaining," IZA Discussion Papers 5079, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5079
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    Cited by:

    1. Mitesh Kataria & Natalia Montinari, 2012. "Risk, Entitlements and Fairness Bias: Explaining Preferences for Redistribution in Multi-person Setting," Jena Economic Research Papers 2012-061, Friedrich-Schiller-University Jena.
    2. Paetzel, Fabian & Sausgruber, Rupert & Traub, Stefan, 2014. "Social preferences and voting on reform: An experimental study," European Economic Review, Elsevier, vol. 70(C), pages 36-55.
    3. Rodriguez-Lara, Ismael, 2016. "Equity and bargaining power in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 144-165.
    4. Anita Gantner & Kristian Horn & Rudolf Kerschbamer, 2013. "Fair Division in Unanimity Bargaining with Subjective Claims," Working Papers 2013-31, Faculty of Economics and Statistics, University of Innsbruck.
    5. Gantner, Anita & Kerschbamer, Rudolf, 2016. "Fairness and efficiency in a subjective claims problem," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 21-36.

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    More about this item

    Keywords

    randomness in production process; performance information; bargaining; entitlements; experiments;
    All these keywords.

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D29 - Microeconomics - - Production and Organizations - - - Other
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • M59 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Other

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