Information, Strategic Behavior and Fairness in Ultimatum Bargaining; An Experimental Study

Abstract

"This paper reports on an experimental study of ultimatum bargaining situations in which an inactive third player is present. The proposer X makes a proposal(x,y, z) on how to divide a cake between X, Y and Z. Information, a message m, about this proposal is sent to the responder Y who has to decide whether to accept or reject the proposal. If Y accepts, each player gets paid according to the proposal, otherwise each player gets zero. There are three possible messages m = (x, y, z),rh = y, and m = z. The information condition is common knowledge. The main regularity observed is that, the extent of strategic behavior decreases with the information content of the message."