Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection

Shachat, J.; Swarthout, J.T.

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.

Citation

Shachat, J., & Swarthout, J. (2013). Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection. Games, 4(4), 738-753. https://doi.org/10.3390/g4040738

• Journal Article Type: Article
• Publication Date: Nov 27, 2013
• Deposit Date: Sep 17, 2014
• Publicly Available Date: Oct 14, 2014
• Journal: Games
• Publisher: MDPI
• Peer Reviewed: Peer Reviewed
• Volume: 4
• Issue: 4
• Pages: 738-753
• DOI: https://doi.org/10.3390/g4040738
• Keywords: Ultimatum bargaining, Auction, Forward induction, Loss avoidance.
• Public URL: https://durham-repository.worktribe.com/output/1445314