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Expectations and fairness in a simple bargaining experiment

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Abstract

We evaluate two competing hypotheses that try to account for robust violations of the predictions of game theory in Ultimatum bargaining experiments. One popular hypothesis is that the subjects are motivated by considerations of fairness that are not modelled by traditional theory. The alternative hypothesis is that the subjects do not have common knowledge of the rationality, beliefs and motives of other players. Each hypothesis can explain existing data. We design several experiments to discriminate between these two hypotheses. The results provide strong support for the alternative hypothesis.

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Authors and Affiliations

  1. Department of Economics, College of Business Administration, University of South Carolina, 29208, Columbia, SC, USA

    Glenn W. Harrison

  2. Department of Accounting, Carlson School of Management, University of Minnesota, 55420, Minneapolis, MN, USA

    Kevin A. McCabe

Authors
  1. Glenn W. Harrison
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  2. Kevin A. McCabe
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Additional information

Dewey H. Johnson Professor of Economics, College of Business Administration, University of South Carolina, and Associate Professor, Department of Accounting, University of Minnesota, respectively. Research support from the Office of the U.S. Trade Representative and the National Science Foundation is gratefully acknowledged. We are grateful to Ronald Harstad and an anonymous referee for excellent comments.

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Harrison, G.W., McCabe, K.A. Expectations and fairness in a simple bargaining experiment. Int J Game Theory 25, 303–327 (1996). https://doi.org/10.1007/BF02425260

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