
Abstract
There is strong evidence that in bargaining situations with asymmetric outside options people exhibit self-serving biases concerning their fairness judgements. Moreover, psychological literature suggests that this can be a driving force of bargaining impasse. This paper extends the notion of inequity aversion to incorporate self-serving biases due to asymmetric outside options and analyses whether this leads to bargaining breakdown. I distinguish between sophisticated and naive agents, that is, those agents who understand their bias and those who do not. I find that breakdown in ultimatum bargaining results from naiveté of the proposers.
Item Type: | Paper |
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Keywords: | fairness perceptions, self-serving bias, inequity aversion, ultimatum bargaining, outside options |
Faculties: | Economics Economics > Munich Discussion Papers in Economics Economics > Munich Discussion Papers in Economics > Behavioral Economics |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
JEL Classification: | A13, C7, D63 |
URN: | urn:nbn:de:bvb:19-epub-899-2 |
Language: | English |
Item ID: | 899 |
Date Deposited: | 07. Mar 2006 |
Last Modified: | 08. Nov 2020, 01:01 |