Eythan Weg

Two-person bargaining behavior in fixed discounting factors games with infinite horizon

Abstract We consider a noncooperative game in which two bargainers have to divide a given surplus (“pie”) by alternating in making and responding to proposals over the division of the surplus; time is discounted, the number of rounds is unlimited, and the discount factors are common knowledge. Two experiments using both equal and unequal discount factors are reported. Their major purpose is to test the subgame perfect equilibrium and compare it to two simpler models incorporating the norms of equality and equity. Analyses of final agreements, number of rounds to agreement, and counteroffers reject the subgame perfect equilibrium model and partially support the other two models.

On the failure to induce meager offers in ultimatum game

Abstract We report on a failure to elicit extreme demands in modified ultimatum games where player 1 is either structurally weaker or stronger than she or he would be in the standard ultimatum game. These games are obtained by extending the ultimatum game to costless two-period games; in one type of game player 1 is given two opportunities to propose, and in the other, the players alternate playing the proposer role. Our results coupled with results reported by other experimenters suggest that ultimatum ourcomes are in inherent contrast with those suggested by standard non-cooperative game theory. We argue that as long as one player can veto any offer by the other, shares tend to be more even than is predicted by the standard game-theoretic model.

Toward the settlement of the fairness issues in ultimatum games: A bargaining approach

Abstract It has been suggested that modest demands by first movers in ultimatum games are motivated by fairness. Here we present a bargaining framework in which the main characteristic of the ultimatum game is embedded in an infinite horizon fixed-cost bargaining game where a quit move is a legitimate response. We show that the threat of quitting which in theory is empty, has nonetheless a significant attenuating effect on the demands of strong players. The fairness argument is therefore invalid since no moderation of demands is seen when the quit move is forbidden.

Invariance failure under subgame perfectness in sequential bargaining

Abstract A basic property of any normative theory of decision making – individual or group – is its invariance under the theorys own equivalence specification. Growing evidence from experimental studies in several areas of game playing indicates that the game-theoretic notion of strategic equivalence is systematically violated in the behavioral arena. The present study expands the design of previous studies of bilateral bargaining by including a third party and a new trading rule – modifications which induce behavioral patterns that reject equivalence under subgame perfection.

Failure of Bayesian Updating in Repeated Bilateral Bargaining

Ever since Camerer and Weigelt (1988) concluded in their important experimental work that “sequential equilibrium describes actual behavior well enough,” we might be tempted to use this theory confidently in various domains. To assess the robustness of the above conclusion, the present study attempts to explore Bayesian updating in a bilateral negotiated sale setup injected with a whiff of an ultimatum aroma. We conclude that the ultimatum nature of the basic game tends to overwhelm rational behavior on the part of the sellers and that buyers are not cognizant of favorable prices occurring later in the game.