Self-Serving Biases in Bargaining

Simone Kohnz

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: There is strong evidence that in bargaining situations with asymmetric outside options people exhibit self-serving biases concerning their fairness judgements. Moreover, psychological literature suggests that this can be a driving force of bargaining impasse. This paper extends the notion of inequity aversion to incorporate self-serving biases due to asymmetric outside options and analyses whether this leads to bargaining breakdown. I distinguish between sophisticated and naive agents, that is, those agents who understand their bias and those who do not. I find that breakdown in ultimatum bargaining results from naiveté of the proposers.

Keywords: fairness perceptions; self-serving bias; inequity aversion; ultimatum bargaining; outside options (search for similar items in EconPapers)
JEL-codes: A13 C7 D63 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-cbe, nep-gth and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:899

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