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

21 Pages Posted: 1 Mar 2013

See all articles by Jason Shachat

Jason Shachat

Durham University

J. Todd Swarthout

Georgia State University - Andrew Young School of Policy Studies

Date Written: March 1, 2013

Abstract

We conduct an experiment in which we auction the scarce rights to play the Proposer and Responder positions in subsequent ultimatum games. As a control treatment, we randomly allocate these rights and then charge exogenous participation fees according to the auction price sequences observed in the auction treatment. With endogenous selection into ultimatum games via auctions, we find that play converges to a session-specific Nash equilibrium and auction prices emerge which support this equilibrium by the principle of forward induction. With random assignment and exogenous participation fees, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. The Nash equilibrium observed within a session results in low ultimatum game offers, but the subgame perfect Nash equilibrium is never observed.

Keywords: Ultimatum Bargaining, Auction, Forward Induction

JEL Classification: C92, C78, D44

Suggested Citation

Shachat, Jason and Swarthout, J. Todd, Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2226480 or http://dx.doi.org/10.2139/ssrn.2226480

Jason Shachat (Contact Author)

Durham University ( email )

Durham University Business School
Mill Hill Lane
Durham, Fujian DH1 3LB
United Kingdom

J. Todd Swarthout

Georgia State University - Andrew Young School of Policy Studies ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

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