Self-Serving Use of Equity Rules in Bargaining with Asymmetric Outside Options

Heike Hennig-Schmidt, Bernd Irlenbusch (), Rainer Rilke and Gari Walkowitz ()
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Bernd Irlenbusch: University of Cologne

No 7625, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We experimentally investigate multiple notions of equity in ultimatum bargaining with asymmetric outside options. Building on the generalized equity principle formulated by Selten (1978), we derive three different equity rules that can explain 43% of all offers. Our within-subject design further allows us to show that proposers use different equity rules and apply them in a self-serving manner. They tend to follow the rules that suggest the highest payoff for them. Responders exhibit a similar pattern of behavior. Combined, these tendencies lead to high inefficiencies due to frequent rejections.

Keywords: Outside Options; Equity Principle; Ultimatum Game (search for similar items in EconPapers)
JEL-codes: C71 C72 C78 C91 D63 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - completely revised and extended version published as 'Designing Feedback in Voluntary Contribution Games: The Role of Transparency" in: Experimental Economics 2019, 22(2), 552–576

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Working Paper: Self-Serving Use of Equity Rules in Bargaining with Asymmetric Outside Options (2013)
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