Sharing with the powerless third: Other-regarding preferences in dynamic bargaining

Manuel Schwaninger

Journal of Economic Behavior & Organization, 2022, vol. 197, issue C, 341-355

Abstract: Other-regarding preferences are powerful drivers of human behavior, leading individuals to forgo their own economic gains to share with others. However, when subjects with different levels of other-regarding concern bargain about how to distribute payoffs, it is unclear whether joint bargaining decisions reflect their individual preferences. In this free-form bargaining experiment, I examine how other-regarding preferences of two subjects interact and influence negotiated distribution decisions when they allocate payoffs between themselves and a powerless third subject. The data reveals that fairness between the bargainers is more important than fairness towards the third subject; bargainers only allocate payoff shares to third subjects if the other bargainer is willing to allocate the same amount, even if their other-regarding preferences differ strongly from each other when revealed individually. Through the formal analysis, I can link the results to the other-regarding preferences elicited individually and, thereby, provide new insights into the interaction of other-regarding preferences in joint decision-making environments.

Keywords: Experiment; Free-form bargaining; Nash bargaining solution; Social preferences; Third Agent (search for similar items in EconPapers)
JEL-codes: C78 C92 D64 D9 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:197:y:2022:i:c:p:341-355

DOI: 10.1016/j.jebo.2022.03.002

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