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Self-Serving Use of Equity Rules in Bargaining with Asymmetric Outside Options

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  • Irlenbusch, Bernd
  • Hennig-Schmidt, Heike
  • Rilke, Rainer
  • Walkowitz, Gari

Abstract

We experimentally investigate the relevance of (asymmetric) outside options in ultimatum bargaining. Building on the generalized equity principle formulated by Selten (1978) we derive three di erent equity rules. These equity rules can explain 43% of all o ers. Our within-subject design allows us to show that proposers apply the equity rules in a self-serving manner, i.e., proposers tend to follow the rules that suggest the highest payo for them. This tendency leads to high ine ciencies due to frequent rejections.

Suggested Citation

  • Irlenbusch, Bernd & Hennig-Schmidt, Heike & Rilke, Rainer & Walkowitz, Gari, 2013. "Self-Serving Use of Equity Rules in Bargaining with Asymmetric Outside Options," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79975, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79975
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    1. Chiu, Y. Stephen & Rachel Yang, B., 1999. "The outside option, threat point, and Nash bargaining solution," Economics Letters, Elsevier, vol. 62(2), pages 181-188, February.
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    Cited by:

    1. Felix Kölle & Dirk Sliwka & Nannan Zhou, 2016. "Heterogeneity, inequity aversion, and group performance," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(2), pages 263-286, February.
    2. Rodriguez-Lara, Ismael, 2016. "Equity and bargaining power in ultimatum games," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 144-165.
    3. Anbarci, Nejat & Feltovich, Nick, 2018. "How fully do people exploit their bargaining position? The effects of bargaining institution and the 50–50 norm," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 320-334.
    4. Heike Hennig-Schmidt & Gari Walkowitz, 2015. "Negotiations among Chinese and Germans - An Experimental Case Study," Cologne Graduate School Working Paper Series 06-01, Cologne Graduate School in Management, Economics and Social Sciences.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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