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Exploiting Ultimatum Power When Responders Are Better Informed − Theoretical and Experimental Analysis of Conflict Resolution

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  • Werner Güth
  • Francesca Marazzi
  • Luca Panaccione

Abstract

In dyadic ultimatum bargaining proposers, who are privately informed about the pie size, can exploit their “moral wiggle room†by engaging in unfairness which is unobservable by responders. Our setup instead assumes better informed responders and, as a consequence, limits ultimatum power and questions conflict resolution via acceptance of ultimatum proposals. In addition to testing the game theoretic solution, based on common opportunism, we assess whether two different market framings boost benchmark behavior. Our results confirm nearly universal responder opportunism. Although the benchmark proposer demand is modal, proposer choices display substantial variation, even in later rounds and even in the range in which lower demands would let both parties expect to earn more. Nevertheless, such inefficiently large demands become less frequent across rounds. Our results also show that market framing is insignificant and more so in later rounds.

Suggested Citation

  • Werner Güth & Francesca Marazzi & Luca Panaccione, 2024. "Exploiting Ultimatum Power When Responders Are Better Informed − Theoretical and Experimental Analysis of Conflict Resolution," Journal of Conflict Resolution, Peace Science Society (International), vol. 68(2-3), pages 381-403, March.
  • Handle: RePEc:sae:jocore:v:68:y:2024:i:2-3:p:381-403
    DOI: 10.1177/00220027231167846
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    References listed on IDEAS

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    2. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    3. Jason Dana & Roberto Weber & Jason Kuang, 2007. "Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 67-80, October.
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