Efficiency versus Equality in Bargaining

Fabio Galeotti, Maria Montero and Anders Poulsen (a.poulsen@uea.ac.uk)

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Abstract: We consider how the outcome of bargaining varies with changes in the trade-off between equality, efficiency, and total-earnings maximization. We observe that subjects avoid an equal-earning outcome if it is Pareto inefficient; a large proportion of bargaining pairs avoids an equal and Pareto efficient outcome in favor of one giving unequal and total-earnings maximizing payoffs, and this proportion increases when unequal outcomes imply larger earnings to one of the players, even though this also implies higher inequality; finally, we document a compromise effect that violates the independence of irrelevant alternatives condition.

Date: 2019
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Published in Journal of the European Economic Association, 2019, 17 (6), pp.1941-1970. ⟨10.1093/jeea/jvy030⟩

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Journal Article: Efficiency Versus Equality in Bargaining (2019)
Working Paper: Efficiency versus Equality in Bargaining (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01763003

DOI: 10.1093/jeea/jvy030

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