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An Experimental Game of Loss Sharing

Wulf Gaertner (), Lars Schwettmann and Yongsheng Xu ()

No 2017-01, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

Abstract: We conduct a lab-experimental study of bargaining over the distribution of monetary losses. Groups of four differently endowed participants must agree, as a group, on the contribution each participant will make to cover a financial loss imposed on the group. The study sheds light on burden sharing and what loss allocation rules groups adopt. Furthermore, we characterize a new theoretical model which contains the proportional rule and equality of losses as special cases but collides with the constrained equal awards rule. The combination of our model and the constrained equal awards rule can explain the majority of proposals made in our experiment.

Keywords: loss sharing; axiomatic characterization of allocation rules; experimental bargain-ing (search for similar items in EconPapers)
JEL-codes: C91 D31 D63 D71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2017-02
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