Ultimatum Bargaining with Rational Inattention

A seller bargains with a rationally inattentive buyer (Sims 2003) over a good of random quality. After observing quality, the seller makes a take-it-or-leave-it offer. The buyer pays attention to the seller’s product and offer at a cost proportional to expected entropy reduction. Because attention is free off-path, multiple equilibria emerge, many of which are efficient. A trembling-hand-like refinement (Selten 1975) rules out efficiency, delivering complete disagreement when attention is expensive and a unique equilibrium with trade when attention is cheap. In this equilibrium, the buyer overpays for low-quality goods, underpays for high-quality goods, and earns a strictly positive payoff. (JEL C78, D82, D83, D86, L15)

Country Differences in Ultimatum Wage Bargaining with a Real Task: Evidence from Greece, Spain and the UK

From experiments run in Greece, Spain and the UK, this paper studies ultimatum bargaining over the wage paid in order to have a subject perform a given real task. Compared with Greece and Spain, significantly higher wage offers and lower acceptance probabilities are found in the UK. These effects lead to higher wages in the UK Country differences in both employer and employee behavior have a clear gender component. Specifically, we find that Greek and Spanish females offer lower wages than British females. Contrary to what is obtained for UK subjects, Greek and Spanish females reject more than males.