All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

Stefan Kohler
''Guilt causes equal or unequal division in alternating-offer bargaining''
( 2014, Vol. 34 No.3 )
Parties in a bargaining situation may perceive guilt, a utility loss caused by receiving the larger share that is modeled in some social preferences. I extend Rubinstein (1982)´s solution of the open-ended alternating-offer bargaining problem for self-interested bargainers to a game with equally patient bargainers that exhibit a similar degree of guilt. The bargaining parties still reach agreement in the first period. If guilt is strong, they split the bargaining surplus equally. In contrast, if guilt is weak, the bargaining outcome is tilted away from the Rubinstein division towards a more unequal split. As both bargainers sensation of guilt diminishes, the bargaining outcome converges to the Rubinstein division.
Keywords: alternating offers, bargaining, bargaining power, behavioral economics, equity, fairness, guilt, inequality aversion, negotiation, social preferences
JEL: C7 - Game Theory and Bargaining Theory:General
D3 - Distribution: General
Manuscript Received : Oct 09 2013 Manuscript Accepted : Jul 26 2014

  This abstract has been downloaded 85 times                The Full PDF of this paper has been downloaded 58 times