Bargaining, Fairness and Conflict

A central issue in behavioral economics is the role of fairness, and whether it is hard-wired or acquired as a result of self-interested considerations. Binmore (Crooked thinking or straight talk: Modernizing epicurean scientific philosophy, Springer, 2020) has recently argued that fairness does not...

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Bibliographic Details
Published in:Homo oeconomicus 2022-12, Vol.39 (2), p.259-288
Main Authors: Holt, Charles A., Sieberg, Katri K.
Format: Article
Language:English
Subjects:
Behavioral economics
Behavioral/Experimental Economics
Earnings
Economics
Economics and Finance
Fairness
Game Theory
Games
Institutional/Evolutionary Economics
International Political Economy
Law and Economics
Research Paper
Role reversal
Self interest
Social Choice/Welfare Economics/Public Choice/Political Economy
Teaching
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Summary:A central issue in behavioral economics is the role of fairness, and whether it is hard-wired or acquired as a result of self-interested considerations. Binmore (Crooked thinking or straight talk: Modernizing epicurean scientific philosophy, Springer, 2020) has recently argued that fairness does not always occur, and when it does, it is caused by self-interest. The ultimatum game is well known for the sharp divergence of experimental data from theoretical predictions based on self-interest. Proposers frequently offer ‘fair’ shares of a fixed “pie” of potential earnings, and unfair offers are often rejected, which results in zero earnings for both bargainers. Slight modifications of the ultimatum game, however, can add a more realistic context for some applications, and the resulting gamesman-like behavior can yield results closer to theoretical predictions. This paper reports an experiment based on a modified ultimatum game in which rejection results in a costly conflict with a stochastic outcome. We observe gamesman-like offer behavior, especially after role reversal and learning. Conflict adds an element of competition and seems to play a role in teaching subjects what offers are appropriate—often moving demands away from fair divisions towards the game-theoretic predictions.
ISSN:0943-0180
2366-6161
DOI:10.1007/s41412-022-00130-x