Rejecter-proposer legislative bargaining with heterogeneous time and risk preferences

This article considers a legislative bargaining model in which the rejecter in the previous round becomes the proposer in the current round. We allow the time and risk preferences to differ across players and the voting quota to be a supermajority or submajority. We show that there exists a stationary subgame perfect equilibrium and that each player’s equilibrium payoff conditional on being a proposer is unique, and we explicitly derive the equilibria and equilibrium payoff. We compare a proposer’s equilibrium payoff when the time interval between two consecutive rounds tends to zero with respect to the protocols of the selection of proposers and the voting quota: we show that a proposer’s equilibrium payoff can be greater in this article’s rejecter-proposer model than in the Baron–Ferejohn random-proposer model; even though the voting quota increases, a proposer’s equilibrium payoff can increase.     

Demonstration of power: Experimental results on bilateral bargaining

We test the empirical effectiveness of two theoretical proposals to equilibrate bargaining power in bilateral bargaining. Our experimental design is based on the two-player versions of the multibidding game (Pérez-Castrillo & Wettstein, 2001) and the bid-and-propose game (Navarro & Perea, 2005). Both models build on the ultimatum game and balance parties’ bargaining power by auctioning the role of the proposer in the first stage. We find that proposers learn how to send an acceptable proposal by trial and error, guided by responders’ rejections. The observed behavior stabilizes for the final experimental rounds and the payoff gap between the proposer and the responder seems to close down. However, the strategies chosen by subjects are remarkably different from the theoretical ones.     

Partnership dissolution and proprietary information

This article analyzes simple rules for dissolving a common value partnership in which one partner holds proprietary information. The winner’s bid auction and the loser’s bid auction are payoff equivalent and both favor the informed partner. If it is verifiable which partner is informed, the cake-cutting mechanism (CCM) generates a “fair” allocation by making the informed partner the proposer. If that information is not verifiable and the identity of the proposer is determined through a lottery, the CCM favors the informed partner, too. Moreover, CCM is fairer than the auctions for common distributions of the asset value.     

What are you calling intuitive? Subject heterogeneity as a driver of response times in an impunity game

Studies on the intuitive or deliberate nature of human actions often use time constraints for identification, assuming that constrained individuals fall back to intuitive behavior. This identification strategy disregards individual heterogeneity and self-priming, i.e. the behavioral rule that subjects can form during the instructions phase, and then apply irrespective of the time constraint. We use respondent data from an impunity game as an example of how subject heterogeneity can drive results. 24 respondents face 240 more or less unfair allocation proposals out of a small or large pie and can accept or reject the offer. Upon rejection respondents burn their own money, but not the proposer’s. Respondents decisions are communicated to the proposer. On average, emotional rejections take longer than deliberate acceptances. Including individual heterogeneity, though, we find that subjects who mostly accept (reject) take more time to reject (accept). Faster decisions are the ones conforming with the modal early reaction. We attribute this finding to heterogeneity in self-priming. Since self-priming is orthogonal to time constraints, it has the capacity to invalidate their use in the identification of dual decision modes.     

Parliamentary bargaining with priority recognition for committee members

By parliamentary practice, the members of the committee reporting a bill are granted priority recognition for the purpose of moving amendments. If they seek recognition, the committee members are recognized in order of seniority. We extend the random proposer model of parliamentary bargaining by allowing for priority recognition of T > 1 committee members. In contrast to the T = 1 case considered in the literature, the payoff of the first proposer is not unique if T > 1, and even at the lower bound of the outcome continuum, it is substantially higher than with T = 1. Hence, priority recognition strikingly improves the bargaining power of the proposing committee member, and pure random proposer models overstate predictability and understate bargaining power.     

On the role of the hostage in ultimatum bargaining games

This paper examines behavior in a three-player ultimatum game. The payoff to the non-decision-making player (the “hostage”) is separate from the bargaining pie and varies. We find that while responders may behave altruistically towards the hostage, they are more likely to reject a given offer if it leaves them with a more inequitable payoff relative to the hostage. Offers appear to be unaffected by the presence of a hostage. Though not a direct test of the Fehr and Schmidt [Fehr, E., Schmidt, K.M., 1999. A theory of fairness, competition, and cooperation. Quarterly Journal of Economics 114 (3), 817–868] and Bolton and Ockenfels [Bolton, G., Ockenfels, A., 2000. ERC: a theory of equity, reciprocity, and competition. American Economic Review 90, 166–193] models, our results are qualitatively consistent with their predictions.     

Cooperation or conniving: How public sector rules shape the decision

To what extent will decision makers in the economy use their time, energy, and imagination to cooperate in production and productive exchange? To what extent will they instead devote their efforts toward simply redividing the economic pie to arrange bigger slices for themselves at the expense of others, and ultimately at the expense of the size of the pie? This paper explains the case to be made that added collectivization since 1960, embodied in the growth industries of regulation and tax collection, have significantly shifted entrepreneurial efforts nationally toward pie redividing and away from pie enlarging activities. Empirical evidence is provided to support this assertion.     

Generosity:a supreme virtue

Generosity is a virtue and, as such, plays an important role in interpersonal communication. It is therefore worth considering why people are generous and how to promote altruism. Some researchers try to explain generosity from different perspectives and indicate how individuals can be more generous. In this paper, this research is analyzed in detail.     

Tax evasion and inequity

A number of concepts of inequity are examined in a model that incorporates tax-enforcement parameters, personal resources, personal attributes, and perceived inequity. The rôle of risk aversion and its interaction with attitudes toward inequity, interaction with other tax evaders, and the means that each person has of influencing inequity are considered as determinants of individual tax-compliance decisions.     

Dynamic fairness in repeated bargaining with risk

We study dynamic notions of fairness via an experiment of a two-round bilateral bargaining environment, where the payoff to one player is subject to ex-post risk, while the other player receives a fixed payment, effectively making the player exposed to risk a residual claimant. The ex-post risk not only provides substantive issues for bargaining parties to resolve in the experiment – i.e. what is a fair compensation for the exposure to risk – it also results in the endogenous formation of reference points for the second round due to ex post inequality after the realization of uncertainty in the first round. We find support for a “payback” hypothesis. That is, agreements in the second round significantly differ from the first round in a manner consistent with reducing the inequality that arose due to the initial pie realization.     

Reciprocal relationships in tax compliance decisions

Reciprocity considerations are important to the tax compliance problem as they may explain the global dynamics of tax evasion, beyond individual tax evasion decisions, toward a downward or upward spiral. To provide evidence on reciprocity in tax compliance decisions, we have conducted a laboratory experiment in which we introduced two types of inequities. The first type of inequity is called vertical, because it refers to inequities introduced by the government when it sets different fiscal parameters for identical taxpayers, while the second type of inequity is called horizontal because it refers to the fact that taxpayers may differ in tax compliance decisions. In this setting, taxpayers may react to a disadvantageous or advantageous inequity through negative or positive reciprocal behaviors, respectively. Our results support the existence of negative and positive reciprocity in both vertical and horizontal cases. When both inequities come into play and may induce reciprocal behaviors in opposite directions, the horizontal always dominates the vertical.     

Conditionality of adaptiveness: Investigating the relationship between numeracy and adaptive behavior

Recent studies have illustrated that individuals with higher numeracy are more likely to make adaptive choices than individuals with lower numeracy. Highly numerate individuals can consistently make normatively superior choices by maximizing expected value (EV) in meaningful choice problems (high-payoff condition). However, in trivial problems (low-payoff condition), they can also adaptively change their strategy to make good enough choices and not follow a normatively superior strategy. Upon inspection of choice problems used in earlier studies, it was revealed that payoff was not the only varying factor between the two payoff conditions. Therefore, it is unclear whether payoff conditions alone can provide sufficient context for adaptive modulation in decision strategy. In two pre-registered studies (N = 343), we tested numerate individuals’ adaptiveness under high- and low-payoff conditions addressing the limitations of earlier studies. Results revealed that the presence of two payoff conditions together did not initiate adaptive strategy selection, regardless of participants’ numeracy. Instead, numerate individuals, compared to less numerate individuals, consistently made more EV-consistent choices in both payoff conditions. We identified that the change in EV consistency across payoff conditions was influenced more by the absolute difference than the relative difference in the expected reward.     

Choice set,relative income,and inequity aversion: An experimental investigation

Inequity aversion preference has been widely applied in interpretations of various economic behaviors. A rapidly growing literature has been attempting to measure the strength of inequity aversion preferences as accurately as possible. We vary two factors that might affect the accuracy of the measurement of inequity aversion preference, i.e., choice sets with different underlying inequity aversion strength ranges and with different relative income inequities while absolute income inequities remain fixed. We find that unidirectional changes in the choice sets for disadvantageous and advantageous inequity aversion preferences significantly bias the measured strength of both preferences in the same directions of the changes and that the variance in inequity aversion increases with the range of choice sets. Moreover, a decrease in relative income inequity raises the measured strength of advantageous inequity aversion but does not affect disadvantageous inequity aversion preference. Our results suggest controlling for choice sets and relative income inequity between players to improve the measurement accuracy of inequity aversion preference.     

Welfare, freedom of choice and composite utility in the logit model

Discrete choice models characterize the alternatives in the choice set by utilities/attributes. The decision making is described by a probability distribution over the choice set. In this paper we introduce a welfare measure based on expected payoff and expected freedom of choice for the simple one parameter logit model. In this case the welfare measure turns out to be the so called composite utility. This means that the composite utility can be interpreted as the combined benefit of expected payoff and expected freedom of choice. The proposed welfare measure can be extended to the linear-in-parameters logit model and nested logit models and others. The proposed welfare measure is formulated in terms of the choice probability distribution. It depends on the form of the probabilities, but not on any particular derivation of the distribution.     

Personality traits and strategic behavior: Anxiousness and aggressiveness in entry games

We demonstrate that personality has a systematic effect on strategic behavior. We focus on two personality traits: anxiousness and aggressiveness, and consider a 2-player entry game, where each player can guarantee a payoff by staying out, a higher payoff if she is the only player to enter, but a lower payoff if both players enter. We find that: anxious players enter less; aggressive players enter more; players are more likely to enter against anxious than non-anxious players; and players are less likely to enter against aggressive than non-aggressive players. We discuss the possible mechanism through which personality affects strategic behavior.     

Inequity aversion revisited

Using a laboratory experiment, we study the predictive power of the Fehr–Schmidt (1999) model of inequity aversion and its robustness to reciprocity and stakes. We find stronger evidence for the model’s predictive power at the individual level than what the existing literature suggests. This finding is robust to stakes. However, the model’s predictive power is highly reduced if subjects can reciprocate others’ actions. This suggests that parameter estimates obtained in an environment that allows for reciprocal responses yield a bias in the parameter estimates. In particular, previous estimates (especially of the disutility of disadvantageous inequity aversion) may overestimate the importance of inequity aversion.     

On competing rewards standards—an experimental study of ultimatum bargaining

In the tradition of earlier experimental studies, this paper introduces competing reward standards by letting parties bargain over the distribution of chips. The monetary equivalents of a chip for the bargaining parties can be equal (no competing rewards) or different (competing rewards). The ultimatum game is used as a tool to learn about reward standards in an asymmetric procedure. A major effect of different monetary chip equivalents is observed only when the proposer has a higher chip value. Results are compared to those reported in [Games Econ. Behav. 13 (1966) 100], who used a different experimental design.     

Traveling With the Ball Club: A Code of Conduct for Wives Only

When they accompany their husbands on road trips, the wives of major league baseball players must follow an unwritten code of conduct, a code socially constructed and enforced by men. This code is reflected in the way wives and ballplayers interact on airplanes and buses, and most strikingly, in the requirement that wives stay out of hotel bars where the team is staying. These interactions within a code reflecting female conformity to male dominance, and preserving male privileges, provide a lens through which we can inspect gender inequity and marital inequity, including what can fairly be called institutionalized adultery. We always talk about the unwritten rule book of being a baseball wife. We have our own rules. There's these unwritten rules that you do and you don't do. That's why everybody thinks that every wife should have to go into the minor league system, and not straight into the big leagues. —Marsha     

To profit or not to profit: Women entrepreneurs in India

Entrepreneurial activity attracts certain kinds of individuals, whether it is to promote a social cause in the nonprofit sector or profit in the for‐profit sector. This article looks at the behavior of women entrepreneurs in India in both the for‐profit and nonprofit sectors to test for potential differences and similarities. We chose two groups of entrepreneurial women who founded and led relatively similar‐size organizations in the same city and who provided services primarily to women and children. Our findings show that while all nonprofit entrepreneurs receive a high payoff from promoting social causes, there is no single unifying payoff for for‐profit entrepreneurs. Family background and support, however, play an important role for both sets of entrepreneurs. We find that experience in the sector, social class, caste, and education in?uence entrepreneurial behavior and that this in?uence differs by sector.     

Demand for contract enforcement in a barter environment

Do greater potential gains from trade enhance or erode contracting institutions? In an anonymous exchange environment traders can sign a contract, hence agreeing to interact with the assigned partner, or wait till the next match. Any contract can be endorsed (for a payment) by the enforcement agency, which then observes the interaction with a positive probability known to the traders and punishes any detected infractors. Demand for contract enforcement is the highest amount a proposer of a contract is ready to pay to the agency, in a stationary subgame perfect equilibrium. It may be strictly positive, as we show, even when contracts are broken. Surprisingly, larger potential gains from exchange may dampen the demand, but not always: the demand is boosted under agencies that oversee the interactions frequently.