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Sharing with the powerless third: Other-regarding preferences in dynamic bargaining

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  • Schwaninger, Manuel

Abstract

Other-regarding preferences are powerful drivers of human behavior, leading individuals to forgo their own economic gains to share with others. However, when subjects with different levels of other-regarding concern bargain about how to distribute payoffs, it is unclear whether joint bargaining decisions reflect their individual preferences. In this free-form bargaining experiment, I examine how other-regarding preferences of two subjects interact and influence negotiated distribution decisions when they allocate payoffs between themselves and a powerless third subject. The data reveals that fairness between the bargainers is more important than fairness towards the third subject; bargainers only allocate payoff shares to third subjects if the other bargainer is willing to allocate the same amount, even if their other-regarding preferences differ strongly from each other when revealed individually. Through the formal analysis, I can link the results to the other-regarding preferences elicited individually and, thereby, provide new insights into the interaction of other-regarding preferences in joint decision-making environments.

Suggested Citation

  • Schwaninger, Manuel, 2022. "Sharing with the powerless third: Other-regarding preferences in dynamic bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 341-355.
    • Handle: RePEc:eee:jeborg:v:197:y:2022:i:c:p:341-355
    DOI: 10.1016/j.jebo.2022.03.002
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    More about this item

    Keywords

    Experiment; Free-form bargaining; Nash bargaining solution; Social preferences; Third Agent;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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