Ultimatum Game Bargaining Behaviour: A Classroom Experiment

This study aims to investigate the types of bargaining behaviour students have and the variables that affect these bargaining behaviours by designing an ultimatum bargaining game in the classroom environment (during the real exam). The experimental group consists of 202 students who took the spring term economics final exam. The strategic interaction between students was formulated as a two-person bargaining problem. A cooperative solution was based on the Nash solution also obtained for bargaining problem among students. The findings of this study show that the highest bargaining equilibrium in this game is the equilibrium status based on the Nash solution. Moreover, we concluded that the success of the economy course and the grade-level affect the students’ behaviour according to the equilibrium strategy based on the Nash solution. JEL Codes: C90, C70, C78, C57

Bargained Justice

Gauthier’s Morals by Agreement assumes a laissez-faire original position, in which there is a perfectly competitive market where the equilibrium of individual choices is also economically optimal. Individuals are non-tuistically motivated and their reasoning is agent-relative. However, with externalities, optimality and equilibrium come apart and individuals have to be able to cooperate jointly with one another if their separate interests are to be advanced. Gauthier uses the theory of two-person positive sum bargaining to define the principles upon which the surplus secured by cooperative action is to be allocated. Gauthier’s own proposed formula for resolving the bargaining problem has been effectively criticized. However, his solution is more vulnerable to its assumption that the whole of the factor rent from labour should be included in the social surplus, and well as his neglect of Coase type solutions to the problem of externalities. In respect of public goods, his general theory would also suggest the adoption of Wicksellian taxes. However, his assumption that bargains based on non-tuistic motives can yield a theory of justice is defended.

Playing Fair

Norms requiring individuals to treat their partners fairly can evolve even in populations that lack well-defined identity groups. The emergence of fairness equilibria in the bargaining problem and in Augmented Stag Hunt is analyzed with inductive and evolutionary learning models applied to populations that are not subdivided into preexisting groups. Inductive learning models applied to the bargaining problem yield distributions of equilibrium solutions centered around the egalitarian solution that corresponds to a norm of equal division of benefits. Inductive and evolutionary learning models applied to the Augmented Stag Hunt yield distributions of equilibrium solutions where each side contributes to a commonly desired good that are supported by costly punishments for noncontributors. These results support the strong reciprocity hypothesis in the social sciences without employing the controversial idea of group selection.

LEARNING BARGAINING CONVENTIONS

I examine from a conventionalist perspective the Nash bargaining problem that philosophers use as a tool for analyzing fair division. From this perspective, the solutions to bargaining problems are conventions that can emerge from inductive learning and focal point effects. I contrast the conventionalist approach to analyzing the bargaining problem with the better-known rational choice approach, which I criticize for having overly demanding epistemic presuppositions and for producing disappointing results. I apply a simple model of inductive learning to specific bargaining problems to show that agents can learn from repeated experience to follow a variety of bargaining conventions in a given problem. I conclude that such agents can come to regard two such conventions as focal for the bargaining problem, one that assigns claimants equal shares of a good and another egalitarian solution of equal payoff gains, and that the egalitarian solution tends to prevail when these two solutions differ. I conclude further that the above analysis lends support for admitting interpersonal utility comparisons into the analysis of fair division problems, and also suggests a focal point explanation of the wide acceptance of the Aristotelian proportionality principle of distributive justice.