Fairness and Signaling in Bargaining Games

Unfairness emerges in bargaining games under a variety of conditions. Two effects increase the probability that a simulated society converges to unfairness: (i) the Red King effect produces advantage in favor of members of the larger group; (ii) the Bargaining Power effect produces advantage in favor of the group with more powerful individuals. This paper shows how these effects are modulated by relationships between unobservable and observable traits (signals). We investigate three models. First, when an agent can choose signals, we find a relationship between unfairness and distinctive signaling. Second, we introduce stochastic signaling, in which signals are somewhat (de-)correlated with an underlying trait. Third, we introduce adaptive tolerance, in which agents create a signal using a partition of the underlying trait space. It is shown computationally that, in each case, there is a fall in the proportion of societies converging on unequal resource distribution. Analysis supports the idea that the underlying phenomenon linking all these is the mutual information between the signal and the unobservable trait.