Ultimata bargaining: generosity without social motives

Yves Breitmoser () and Jonathan Tan

MPRA Paper from University Library of Munich, Germany

Abstract: We show and explain how generosity beyond that explainable by social preferences can manifest in bargaining. We analyze an ultimata game with two parties vying to coalesce with a randomly chosen proposer. They simultaneously demand shares of the surplus. The proposer must then make an offer that meets at least one demand, or else the game either continues with a new round or breaks down with all earning zero. Self-interest, altruism, and inequity aversion univocally predict miniscule demands due to inter-party competition; proposers thus obtain the lion's share. We experimentally observe that proposers coalesce with the less demanding party by strategically matching demands, like ultimatum bargaining, but also give non-strategically to the other party, like dictator giving. The observations are incompatible with concave utilities, as implied by social preferences, but are compatible with reference dependent preferences.

Keywords: demand commitment; ultimata bargaining; non-cooperative; laboratory experiment; social preferences; reference dependence (search for similar items in EconPapers)
JEL-codes: C72 C78 C91 D72 (search for similar items in EconPapers)
Date: 2011-09-22
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth and nep-hpe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33613

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