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Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection

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  • Jason Shachat
  • J. Todd Swarthout

Abstract

We conduct an experiment in which we auction the scarce rights to play the Proposer and Responder positions in subsequent ultimatum games. As a control treatment, we randomly allocate these rights and then charge exogenous participation fees according to the auction price sequences observed in the auction treatment. With endogenous selection into ultimatum games via auctions, we find that play converges to a session-specific Nash equilibrium and auction prices emerge which support this equilibrium by the principle of forward induction. With random assignment and exogenous participation fees, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. The Nash equilibrium observed within a session results in low ultimatum game offers, but the subgame perfect Nash equilibrium is never observed.

Suggested Citation

  • Jason Shachat & J. Todd Swarthout, 2013. "Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:002056
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    Cited by:

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    2. Ambec, Stefan & Garapin, Alexis & Muller, Laurent & Rahali, Bilel, 2019. "How institutions shape individual motives for efficiency and equity: Evidence from distribution experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 81(C), pages 128-138.
    3. Duk Gyoo Kim & Sang‐Hyun Kim, 2022. "Multilateral bargaining with proposer selection contest," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 38-73, February.
    4. Choo, Lawrence & Zhou, Xiaoyu, 2019. "Can market competition reduce anomalous behaviours," FAU Discussion Papers in Economics 08/2019, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    5. Fischer, Christian & Normann, Hans-Theo, 2019. "Collusion and bargaining in asymmetric Cournot duopoly—An experiment," European Economic Review, Elsevier, vol. 111(C), pages 360-379.
    6. Choo, Lawrence & Zhou, Xiaoyu, 2022. "Can market selection reduce anomalous behaviour in games?," European Economic Review, Elsevier, vol. 141(C).
    7. Choo, Lawrence & Kaplan, Todd R. & Zhou, Xiaoyu, 2019. "Can auctions select people by their level-k types?," MPRA Paper 95987, University Library of Munich, Germany.
    8. Merkel, Anna & Vanberg, Christoph, 2023. "Multilateral bargaining with subjective claims under majority vs. unanimity rule: An experiment," Journal of Economic Psychology, Elsevier, vol. 95(C).
    9. Choo, Lawrence, 2016. "Market competition for decision rights: An experiment based on the “Hat Puzzle Problem”," MPRA Paper 73408, University Library of Munich, Germany.

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    More about this item

    Keywords

    Ultimatum Bargaining; Auction; Forward Induction;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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