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

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.
Games 2013, 4(4), 738-753; https://doi.org/10.3390/g4040738
Received: 23 September 2013 / Revised: 25 October 2013 / Accepted: 11 November 2013 / Published: 27 November 2013
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. View Full-Text
Keywords: ultimatum bargaining; auction; forward induction; loss avoidance ultimatum bargaining; auction; forward induction; loss avoidance
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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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