Bargaining Power Does Not Matter When Sharing Losses - Experimental Evidence of Inequality Aversion in the Nash Bargaining Game

12 Pages Posted: 14 Jun 2012

See all articles by Eike B. Kroll

Eike B. Kroll

Otto-von-Guericke University Magdeburg

Ralf Morgenstern

affiliation not provided to SSRN

Thomas Neumann

Otto-von-Guericke-Universität Magdeburg

Stephan Schosser

Otto-von-Guericke University - Faculty of Economics and Management

Bodo Vogt

Bielefeld University - Center for Mathematical Economics

Date Written: June 13, 2012

Abstract

While experimental research on social dilemmas focuses on the distribution of gains, this paper analyzes social preferences in the case of losses. In this experimental study, participants share a loss in a Nash bargaining game. Instead of monetary losses, we use waiting time as an incentive. We assume that participants prefer less to more waiting time. Our experiment consists of four versions of the Nash bargaining game, which vary in a way that allows a comparison of four classical concepts on negotiations (Nash, Equal Loss, Equal Gain, and Kalai‐Smorodinski), and Inequality Aversion. We find an equal split of waiting time for all parameter variations. Therefore, our experimental evidence shows that Inequality Aversion provides a better prediction than do classical concepts for the outcome of a Nash bargaining game involving losses. Furthermore, participants resort to Inequality Aversion at the cost of overall welfare.

Keywords: bargaining, losses, inequality aversion, experimental economics

JEL Classification: C7, C9

Suggested Citation

Kroll, Eike B. and Morgenstern, Ralf and Neumann, Thomas and Schosser, Stephan and Vogt, Bodo, Bargaining Power Does Not Matter When Sharing Losses - Experimental Evidence of Inequality Aversion in the Nash Bargaining Game (June 13, 2012). Available at SSRN: https://ssrn.com/abstract=2083600 or http://dx.doi.org/10.2139/ssrn.2083600

Eike B. Kroll (Contact Author)

Otto-von-Guericke University Magdeburg ( email )

Universitätsplatz 2
Magdeburg, Sachsen-Anhalt 39104
Germany

Ralf Morgenstern

affiliation not provided to SSRN ( email )

Thomas Neumann

Otto-von-Guericke-Universität Magdeburg ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

Stephan Schosser

Otto-von-Guericke University - Faculty of Economics and Management ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

Bodo Vogt

Bielefeld University - Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

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