Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104206
Authors: 
Kohnz, Simone
Year of Publication: 
2006
Series/Report no.: 
Munich Discussion Paper 2006-9
Abstract: 
There is strong evidence that in bargaining situations with asymmetric outside options people exhibit self-serving biases concerning their fairness judgements. Moreover, psychological literature suggests that this can be a driving force of bargaining impasse. This paper extends the notion of inequity aversion to incorporate self-serving biases due to asymmetric outside options and analyses whether this leads to bargaining breakdown. I distinguish between sophisticated and naive agents, that is, those agents who understand their bias and those who do not. I find that breakdown in ultimatum bargaining results from naiveté of the proposers.
Subjects: 
fairness perceptions
self-serving bias
inequity aversion
ultimatum bargaining
outside options
JEL: 
A13
C7
D63
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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