The Evolutionary Role of Toughness in Bargaining
30 Pages Posted: 11 Aug 2001
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Aviad Heifetz, Chris Shannon, ...
-
The Limit of Public Policy: Endogenous Preferences
By Oren Bar-gill and Chaim Fershtman
-
Public Policy with Endogenous Preferences
By Oren Bar-gill and Chaim Fershtman
-
On the Evolutionary Emergence of Optimism
By Aviad Heifetz and Yossi Spiegel
-
Evolution of Perceptions and Play
By Daron Acemoglu and Muhamet Yildiz
-
Market Design with Endogenous Preferences
By Aviad Heifetz, Ella Segev, ...