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The contractor game: a theoretical and experimental analysis

Author

Listed:
  • Nejat Anbarci
  • Nick Feltovich
  • Mehmet Y. Gurdal

Abstract

We introduce the contractor game , related to the ultimatum game (UG). The proposer makes an offer , and simultaneously sends a cheap talk message , indicating (possibly falsely) the amount of the offer. The responder observes the message with certainty and the offer with probability p before accepting or rejecting the offer. We theoretically examine versions with p = 0 and p = 0.5 along with the UG, played by some standard economic agents and others who are averse to inequity, lies and lying. The equilibria yield intuitive predictions, which are supported by our experimental results. Offers are higher when they might be seen by the responder. Messages over–state offers, but less so when the offer might be seen. Responders are more likely to accept an unseen offer if it might have been seen. When offers are seen, responders reward truthful messages, rather than punishing lies, compared to when no message is sent.

Suggested Citation

  • Nejat Anbarci & Nick Feltovich & Mehmet Y. Gurdal, 2013. "The contractor game: a theoretical and experimental analysis," Working Papers 2013_7, Deakin University, Department of Economics.
    • Handle: RePEc:dkn:econwp:eco_2013_7
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    File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2013_7.pdf
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    More about this item

    Keywords

    ultimatum game; messages; lies; truth–telling; other–regarding behaviour;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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