Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments with an Increasing Cake

Werner Guth, Peter Ockenfels and Markus Wendel

International Journal of Game Theory, 1993, vol. 22, issue 1, 73 pages

Abstract: Previous ultimatum bargaining experiments have shown that bargainers face the conflict whether to exploit bargaining power or to comply with basic norms of distributive justice. In multiperiod ultimatum bargaining for an increasing cake, trust in fairness can enable cooperation and thus more efficient results but is also open to opportunistic exploitation. In such a game the two players take turns in being the one who suggest an agreement and decides whether this is the final proposal, whereas his partner can only accept this proposal or reject it. While the game theoretic solution implies an immediate agreement assigning nearly all the cake to the demanding player, efficiency requires to postpone the agreement to the last possible round. Our 2 [by] 2-factorial design varies the number of possible bargaining periods and the cake increase, allowing us to explore several hypotheses.

Date: 1993
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