Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70299
Authors: 
Okada, Akira
Riedl, Arno
Year of Publication: 
1999
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 64
Abstract: 
This paper reports the results of experiments involving a 3-person coalition formation game with an ultimatum bargaining character. The grand coalition was always the efficient coalition decision, whereas the values of the 2-person coalitions are varied such that they lead to an efficiency loss in the range of 6.7 up to 30 percent. Furthermore, the 2-person coalition implies social exclusion, since the not chosen member always receives a payoff of zero. Consistent with results reported in the literature on 2- person ultimatum bargaining experiments, negative reciprocity (i.e. punishment of unfair offers) plays a crucial role in decision making. The hypothesis that selfishness and anticipated negative reciprocity by proposers together with actual negative reciprocal behavior of responders lead to inefficient outcomes and social exclusion is strongly supported by the data. It turns out that a huge majority of proposers choose the inefficient and unfair 2-person coalition. Proposer-induced efficiency losses vary between 5 and 20 percent, and one sixth to almost one third of the population is excluded from participation.
Subjects: 
coalition formation
inefficiency
reciprocity
social exclusion
JEL: 
A13
C91
D61
D63
Document Type: 
Working Paper

Files in This Item:
File
Size
290.66 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.