Guilt causes equal or unequal division in alternating-offer bargaining

Stefan Kohler

Economics Bulletin, 2014, vol. 34, issue 3, 1611-1617

Abstract: Parties in a bargaining situation may perceive guilt, a utility loss caused by receiving the larger share that is modeled in some social preferences. I extend Rubinstein (1982)´s solution of the open-ended alternating-offer bargaining problem for self-interested bargainers to a game with equally patient bargainers that exhibit a similar degree of guilt. The bargaining parties still reach agreement in the first period. If guilt is strong, they split the bargaining surplus equally. In contrast, if guilt is weak, the bargaining outcome is tilted away from the Rubinstein division towards a more unequal split. As both bargainers sensation of guilt diminishes, the bargaining outcome converges to the Rubinstein division.

Keywords: alternating offers; bargaining; bargaining power; behavioral economics; equity; fairness; guilt; inequality aversion; negotiation; social preferences (search for similar items in EconPapers)
JEL-codes: C7 D3 (search for similar items in EconPapers)
Date: 2014-07-26
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Guilt causes equal or unequal division in alternating-offer bargaining (2012)
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