Guilt causes equal or unequal division in alternating-offer bargaining

Kohler, Stefan

Guilt causes equal or unequal division in alternating-offer bargaining

MPRA Paper from University Library of Munich, Germany

Abstract: Parties in a bargaining situation may perceive guilt, a utility loss caused by receiving the larger share that is modeled in some social preferences. I extend Rubinstein (1982)'s solution of the open-ended alternating-offer bargaining problem for self-interested bargainers to a game with equally patient bargainers that exhibit a similar degree of guilt. The bargaining parties still reach agreement in the first period. If guilt is strong, they split the bargaining surplus equally. In contrast, if guilt is weak, the bargaining outcome is tilted away from the Rubinstein division towards a more unequal split. As both bargainers sensation of guilt diminishes, the bargaining outcome converges to the Rubinstein division.

Keywords: alternating offers; bargaining; bargaining power; behavioral economics; equity; fairness; guilt; inequality aversion; negotiation; social preferences (search for similar items in EconPapers)
JEL-codes: C78 D03 D63 (search for similar items in EconPapers)
Date: 2012-09-10
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth, nep-hpe and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Guilt causes equal or unequal division in alternating-offer bargaining (2014)
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