Reciprocity, Inefficiency and Social Exclusion: Experimental Evidence

Tinbergen Institute Discussion Paper No. TI 99-044/1

29 Pages Posted: 5 Nov 2001

See all articles by Akira Okada

Akira Okada

Kyoto University

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Netspar

Date Written: July 2001

Abstract

This paper investigates experimentally the impact of reciprocal fairness considerations in multilateral bargaining and coalition formation. The consequences for effciency and the distribution of wealth are analyzed. The results show that reciprocal fairness indeed deeply affects the effciency and equity of coalition formation. In up to 91 percent of the cases an ineffcient and unfair coalition is chosen. Up to almost one third of the population is excluded from bargaining and earns nothing. Effciency losses between 5 and 20 percent occur. The results can be explained by the interplay of selfish behaviour of 'proposers' and negative reciprocal behaviour of 'responders'.

Keywords: Coalition formation, ineffciency, reciprocity, social exclusion.

JEL Classification: A13, C91, D61, D63

Suggested Citation

Okada, Akira and Riedl, Arno M., Reciprocity, Inefficiency and Social Exclusion: Experimental Evidence (July 2001). Tinbergen Institute Discussion Paper No. TI 99-044/1, Available at SSRN: https://ssrn.com/abstract=289185 or http://dx.doi.org/10.2139/ssrn.289185

Akira Okada

Kyoto University ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto, 606-8501
Japan

Arno M. Riedl (Contact Author)

Maastricht University ( email )

Department of Microeconomics & Public Economics
P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.arnoriedl.com

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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