Envy can promote more equal division in alternating-offer bargaining
Bargainers in an open-ended alternating-offer bargaining situation may perceive envy, a utility loss caused by receiving the smaller share that is modeled in some social preferences in addition to self-interest. I extend Rubinstein (1982)'s original solution of the bargaining problem for two self-interested bargainers to this strategic situation. Bargainers still reach agreement in the first period and their bargaining shares increase in the strength of their own envy. As both bargainers' envy diminishes, the agreed partition converges to the Rubinstein division. If equally patient bargaining parties exhibit similar envy, then the agreed partition is tilted away from the Rubinstein division towards the equal division. Notably, the potential sensation of envy also boosts the share of the eventually envy-free party who leaves the bargaining with the larger share under the agreed partition. This gain in bargaining strength through envy can result in a bargaining outcome that is more unequal than predicted by the Rubinstein division.
|Date of creation:||10 Sep 2012|
|Publication status:||Published in Journal of Neuroscience, Psychology, and Economics 6.1(2013): pp. 31-41|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Li, Duozhe, 2007. "Bargaining with history-dependent preferences," Journal of Economic Theory, Elsevier, vol. 136(1), pages 695-708, September.
- Fehr, Ernst & Schmidt, Klaus M., 1999.
"A theory of fairness, competition, and cooperation,"
Munich Reprints in Economics
20650, University of Munich, Department of Economics.
- Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
- Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
- 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.
- Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Maria Montero, 2007.
"Inequity Aversion May Increase Inequity,"
Royal Economic Society, vol. 117(519), pages C192-C204, 03.
- G. Bolton, 2010.
"A comparative model of bargaining: theory and evidence,"
Levine's Working Paper Archive
263, David K. Levine.
- Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December.
- Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
- Stefan Kohler, 2012. "Incomplete Information about Social Preferences Explains Equal Division and Delay in Bargaining," Games, MDPI, Open Access Journal, vol. 3(3), pages 119, September.
- Arnaud De Bruyn & Gary E. Bolton, 2008. "Estimating the Influence of Fairness on Bargaining Behavior," Management Science, INFORMS, vol. 54(10), pages 1774-1791, October.
- Dorothea K. Herreiner & Clemens Puppe, 2004.
"Envy Freeness in Experimental Fair Division Problems,"
Bonn Econ Discussion Papers
bgse28_2004, University of Bonn, Germany.
- Dorothea Herreiner & Clemens Puppe, 2009. "Envy Freeness in Experimental Fair Division Problems," Theory and Decision, Springer, vol. 67(1), pages 65-100, July.
- Driesen, Bram & Perea, Andrés & Peters, Hans, 2012.
"Alternating offers bargaining with loss aversion,"
Mathematical Social Sciences,
Elsevier, vol. 64(2), pages 103-118.
- Stefan Kohler, 2005.
"Fairness vs. Social Welfare in Experimental Decisions,"
Economics Working Papers
ECO2005/11, European University Institute.
- Binmore, Ken & Morgan, Peter & Snaked, Avner & Sutton, John, 1991. "Do people exploit their bargaining power? An experimental study," Games and Economic Behavior, Elsevier, vol. 3(3), pages 295-322, August.
- Stefan Kohler, 2014.
"Guilt causes equal or unequal division in alternating-offer bargaining,"
AccessEcon, vol. 34(3), pages 1611-1617.
- Kohler, Stefan, 2012. "Guilt causes equal or unequal division in alternating-offer bargaining," MPRA Paper 40760, University Library of Munich, Germany.
- Ken Binmore & Avner Shared & John Sutton, 1989. "An Outside Option Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 753-770.
- Maria Montero, 2008.
"Altruism, Spite and Competition in Bargaining Games,"
Theory and Decision,
Springer, vol. 65(2), pages 125-151, September.
- Maria Montero, 2005. "Altruism, Spite and Competition in Bargaining Games," Game Theory and Information 0512004, EconWPA.
- Weg, Eythan & Rapoport, Amnon & Felsenthal, Dan S., 1990. "Two-person bargaining behavior in fixed discounting factors games with infinite horizon," Games and Economic Behavior, Elsevier, vol. 2(1), pages 76-95, March.
- Kohler, Stefan, 2012. "More fair play in an ultimatum game after resettlement in Zimbabwe: A field experiment and a structural model," MPRA Paper 40248, University Library of Munich, Germany.
- Topi Miettinen, 2010. "History-dependent Reciprocity in Alternating Offer Bargaining," Finnish Economic Papers, Finnish Economic Association, vol. 23(1), pages 1-15, Spring.
- Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40761. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.