Bargaining under surveillance: Evidence from a three-person ultimatum game

Abstract

This paper investigates how the transparency of decision-making affects preferences over distributional outcomes. We also examine what motivates individuals to voluntarily invest economic resources to monitor decision-making processes. We find that third-party monitoring does not affect distributional outcomes in a three-person ultimatum game. Our results show that a large majority of individuals is willing to pay for a right to monitor decision-making processes despite pecuniary incentives to the contrary. We observe that third-parties are over-confident in believing that an opportunity to scrutinize decision-making processes changes distributional outcomes for their own benefit. Our results suggest that people may over-estimate the effect of transparent decision-making on economic outcomes.