The Evolutionary Role of Toughness in Bargaining

30 Pages Posted: 11 Aug 2001

See all articles by Aviad Heifetz

Aviad Heifetz

Open University of Israel - Department of Economics and Management

Ella Segev

Hebrew University of Jerusalem - Jerusalem School of Business Administration

Date Written: July 2001

Abstract

The experimental evidence on the "endowment effect" (Kahneman et al. 1990) and the "self serving bias" in negotiations (Babcok and Loewenstein 1997) suggests that individuals enter a tough state of mind when they have to make a stand vis-a-vis somebody else. In this work we show how a toughness bias in bargaining may indeed be evolutionary viable. When the inherent toughness of the bargainer is observed by the opponent, this opponent will adjust his behavior accordingly, in a way which may enhance the actual payoff of the biased bargainer. Suppose, then, that a population consists initially of individuals with different inherent degrees of toughness or softness. They are often matched at random to bargain, and biases which are objectively more successful tend to appear more frequently in the society. We show how under various bargaining protocols with asymmetric information, the population will consist, asymptotically, of individuals with some moderate degree of toughness.

Keywords: bargaining, asymmetric information, endowment effect, self-serving bias, toughness, evolution of preferences, payoff-monotonic dynamics

JEL Classification: C78

Suggested Citation

Heifetz, Aviad and Segev, Ella, The Evolutionary Role of Toughness in Bargaining (July 2001). Available at SSRN: https://ssrn.com/abstract=278428 or http://dx.doi.org/10.2139/ssrn.278428

Aviad Heifetz (Contact Author)

Open University of Israel - Department of Economics and Management ( email )

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Israel
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HOME PAGE: http://www.openu.ac.il/Personal_sites/Aviad-Heifetz.html

Ella Segev

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel

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