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Regular version of the site

Article

Asymmetric Outside Options in Ultimatum Bargaining: A Systematic Analysis

International Journal of Game Theory. 2018. Vol. 47. No. 1. P. 301-329.
Irlenbusch B., Hennig-Schmidt H., Rilke R., Walkowitz G.

We set up a laboratory experiment to investigate systematically how varying
the magnitude of outside options—the payoffs that materialize in case of a bargain-
ing breakdown—of proposers and responders influences players’ demands and game
outcomes (rejection rates, payoffs, efficiency) in ultimatum bargaining. We find that
proposers as well as responders gradually increase their demands when their respec-
tive outside option increases. Rejections become more likely when the asymmetry in
the players’ outside options is large. Generally, the predominance of the equal split
decreases with increasing outside options. From a theoretical benchmark perspective
we find a low predictive power of equilibria based on self-regarding preferences or
inequityaversion.However,proposers and responders seem to be guided by the equity
principle, while they apply equity rules inconsistently and self-servingly.