Abstract
We present a controlled laboratory environment in which we use an ultimatum game to generate two endogenous fairness indices. We use these as alternatives to the more conventional exogenous measure, the offer index, in a model of offer-acceptance which includes measures of social value orientations and risk attitudes as variables for explaining the acceptance or rejections of offers in an ultimatum game. In particular we are interested in providing an explanatory model which can support situations in which the likelihood to accept unfair offers (as measured by the offer index) will exceed the likelihood of rejecting a fair offer (again, as measured by the offer index). The offer index in the ultimatum game setting is the amount offered by a sender divided by the total endowment of the sender. Our endogenous fairness indices meet our condition of the likelihood of acceptance of an unfair offer exceeding the likelihood of rejecting a fair offer even though the explanatory power of the offer-acceptance models with the endogenous fairness indices is not significantly different from that with the exogenous fairness index.
Highlights
The objective of this paper is to use the ultimatum game setting in a controlled laboratory environment to provide additional empirical evidence on the puzzling phenomenon of why some economic agents may reject non-trivial offers for distributing the surplus of an economic transaction, while others may accept very trivial amounts.1 Typically these phenomena are observed in ultimatum games or in environments in which principals1[1] write “If one searches for “ultimatum bargaining” on http://scholar.google.com/, there are more than 26,500 results
Offer decisions are evaluated with an OLS regression of the variables identifying pro-social value orientations, risk aversion and risk seeking attitudes on the offers sent
The coefficients for the independent variables in the Offer Model are presented in column 1 of Table 1
Summary
The objective of this paper is to use the ultimatum game setting in a controlled laboratory environment to provide additional empirical evidence on the puzzling phenomenon of why some economic agents may reject non-trivial offers for distributing the surplus of an economic transaction, while others may accept very trivial amounts. Typically these phenomena are observed in ultimatum games or in environments in which principals1[1] write “If one searches for “ultimatum bargaining” on http://scholar.google.com/, there are more than 26,500 results. The objective of this paper is to use the ultimatum game setting in a controlled laboratory environment to provide additional empirical evidence on the puzzling phenomenon of why some economic agents may reject non-trivial offers for distributing the surplus of an economic transaction, while others may accept very trivial amounts.. The objective of this paper is to use the ultimatum game setting in a controlled laboratory environment to provide additional empirical evidence on the puzzling phenomenon of why some economic agents may reject non-trivial offers for distributing the surplus of an economic transaction, while others may accept very trivial amounts.1 These phenomena are observed in ultimatum games or in environments in which principals. Fairness in these environments is conventionally viewed as a transfer of half of the amount that the “sender” in these game has available to share.. Fairness in these environments is conventionally viewed as a transfer of half of the amount that the “sender” in these game has available to share. The greater is the size of the offer, the more likely that the receiver will accept the offer. This measure of fairness alone is unable to provide an explanation for the existence of instances when, ceteris paribus, an “unfair” offer may be more likely to be accepted than a “fair” offer
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