- Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection
- Jason Shachat, J. Todd Swarthout
- #002215 20131205 (published)
- We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is.
- Keywords: ultimatum bargaining; auction; forward induction; loss avoidance
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