Ultimatum Concession Bargaining: an Experimental Study

Unlike letting the Ultimatum Game be played in the strategy mode with monotonic response strategy, both players, the proposer as well as the responder, are allowed to concede. Proposers would concede by increasing second, third, ... binding offers. Similarly, responders concede by decreasing binding acceptance thresholds. Treatments differ in whether to avoid early conflict at least one party must concede. The other condition varies the number of possible concessions, namely, two versus four. Since accepting every positive (last) offer is weakly undominated, the benchmark outcome is the usual one with the smallest positive offer accepted (at least in last attempt). If concessions are necessary, the responder might prefer larger early acceptance thresholds allowing him to concede. Similarly, a proposer might begin by offering much less than what she is finally willing to concede. Our experimental findings confirm the hypothesis of more frequent and larger concessions by responder participants for whom the concessions are hypothetical and essentially mean to rely on weakly dominant behavior. According to our data, the need of concessions weakens the power advantage of the proposer. Surprisingly, the longer horizon does not improve the chances of an agreement, even when no concessions are needed.