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Games 2013, 4(4), 738-753; doi:10.3390/g4040738
Article

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

1
 and
2,*
1 Wang Yanan Institute for Studies in Economics (WISE) and the MOE Key Laboratory in Econometrics, Xiamen University, Xiamen 361005, Fujian, China 2 Department of Economics, Georgia State University, Atlanta, GA 30303, USA
* Author to whom correspondence should be addressed.
Received: 23 September 2013 / Revised: 25 October 2013 / Accepted: 11 November 2013 / Published: 27 November 2013
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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.
Keywords: ultimatum bargaining; auction; forward induction; loss avoidance ultimatum bargaining; auction; forward induction; loss avoidance
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Shachat, J.; Swarthout, J.T. Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection. Games 2013, 4, 738-753.

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