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Auctioning the right to play ultimatum games and the impact on equilibrium selection.

Shachat, J. and Swarthout, J.T. (2013) 'Auctioning the right to play ultimatum games and the impact on equilibrium selection.', Games., 4 (4). pp. 738-753.

Abstract

We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is.

Item Type:Article
Keywords:Ultimatum bargaining, Auction, Forward induction, Loss avoidance.
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Status:Peer-reviewed
Publisher Web site:http://dx.doi.org/10.3390/g4040738
Publisher statement:© 2013 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution license (http://creativecommons.org/licenses/by/3.0/).
Record Created:13 Oct 2014 14:50
Last Modified:14 Oct 2014 10:21

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