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Equitable Allocations in Experimental Bargaining Games: Inequality A version versus Efficiency

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  • Herreiner, Dorothea K.
  • Puppe, Clemens

Abstract

In this paper, we report on a series of free-form bargaining experiments in which two players have to distribute four indivisible goods among themselves. In one treatment the monetary payoffs associated with each bundle of goods are common knowledge; in a second treatment only the ordinal ranking of the bundles is given. We find that in both cases, the following qualitative rule yields a good explanation of individual behavior: First determine the most equal distribution, then find a Pareto improvement provided that this does not create “too much” inequality. In the ordinal treatment, individuals apparently use the ranks in the respective preference orderings over bundles as a substitute for the unknown monetary value. Interestingly, we find much less Pareto-damaging behavior due to inequality aversion in the ordinal treatment.

Suggested Citation

  • Herreiner, Dorothea K. & Puppe, Clemens, 2004. "Equitable Allocations in Experimental Bargaining Games: Inequality A version versus Efficiency," Bonn Econ Discussion Papers 29/2004, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:292004
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    References listed on IDEAS

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    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
    2. Kritikos, Alexander & Bolle, Friedel, 2001. "Distributional concerns: equity- or efficiency-oriented?," Economics Letters, Elsevier, vol. 73(3), pages 333-338, December.
    3. Herreiner, Dorothea K. & Puppe, Clemens, 2004. "Envy Freeness in Experimental Fair Division Problems," Bonn Econ Discussion Papers 28/2004, University of Bonn, Bonn Graduate School of Economics (BGSE).
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    Cited by:

    1. Colin F. Camerer & Gideon Nave & Alec Smith, 2019. "Dynamic Unstructured Bargaining with Private Information: Theory, Experiment, and Outcome Prediction via Machine Learning," Management Science, INFORMS, vol. 65(4), pages 1867-1890, April.
    2. Herreiner, Dorothea K. & Puppe, Clemens, 2004. "Envy Freeness in Experimental Fair Division Problems," Bonn Econ Discussion Papers 28/2004, University of Bonn, Bonn Graduate School of Economics (BGSE).
    3. Chmura, Thorsten & Kube, Sebastian & Pitz, Thomas & Puppe, Clemens, 2005. "Testing (beliefs about) social preferences: Evidence from an experimental coordination game," Economics Letters, Elsevier, vol. 88(2), pages 214-220, August.

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