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Bounded Rationality in Bargaining Games: Do Proposers Believe That Responders Reject an Equal Split?

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  • Ben Greiner

Abstract

Puzzled by the experimental results of the 'impunity game' by Bolton and Zwick (1995) we replicate the game and alter it in a systematic manner. We find that although almost nobody actually rejects an offered equal split in a bargaining game, proposers behave as if there would be a considerably large rejection rate for equal splits. This result is inconsistent with existing models of economic decision making. This includes models of selfish players as well as models of social utility and reciprocity, even when combined with erroneous decision making. Our data suggests that subjects fail to foresee their opponent's decision even for one step in our simple bargaining games. We consider models of bounded rational decision making such as rules of thumb as explanations for the observed behavioral pattern.

Suggested Citation

  • Ben Greiner, 2004. "Bounded Rationality in Bargaining Games: Do Proposers Believe That Responders Reject an Equal Split?," Working Paper Series in Economics 11, University of Cologne, Department of Economics.
  • Handle: RePEc:kls:series:0011
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    File URL: http://ockenfels.uni-koeln.de/fileadmin/wiso_fak/stawi-ockenfels/pdf/wp_series_download/wp0011.pdf
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    References listed on IDEAS

    as
    1. Jordi Brandts & Gary Charness, 2000. "Hot vs. Cold: Sequential Responses and Preference Stability in Experimental Games," Experimental Economics, Springer;Economic Science Association, vol. 2(3), pages 227-238, March.
    2. Bolton Gary E. & Zwick Rami, 1995. "Anonymity versus Punishment in Ultimatum Bargaining," Games and Economic Behavior, Elsevier, vol. 10(1), pages 95-121, July.
    3. Gary E. Bolton & Rami Zwick & Elena Katok, 1998. "Dictator game giving: Rules of fairness versus acts of kindness," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(2), pages 269-299.
    4. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    5. James Andreoni & Marco Castillo & Ragan Petrie, 2003. "What Do Bargainers' Preferences Look Like? Experiments with a Convex Ultimatum Game," American Economic Review, American Economic Association, vol. 93(3), pages 672-685, June.
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    Cited by:

    1. Kritikos, Alexander S. & Tan, Jonathan H. W., 2014. "Would I Care if I Knew? Image Concerns and Social Confirmation in Giving," IZA Discussion Papers 8739, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    ultimatum game; dictator game; impunity game; social utility; bounded rationality;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D3 - Microeconomics - - Distribution

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