Social Comparisons in Ultimatum Bargaining
21 Pages Posted: 28 May 2003
Date Written: June 2003
This paper experimentally examines the effect of social comparisons in ultimatum bargaining. While previous experiments and the theoretical models on fairness focus on the two bargaining counterparts, we address a new reference group - others in like circumstances. We inform responders on how much other responders are offered before they decide whether to accept or reject their specific offer. Such information has a sizable positive effect on offers, rejection and equal split rates. This result is consistent with people disliking deviations from the norm of equity but inconsistent with fairness theories, where people dislike income disparity between themselves and their referents.
Keywords: Fairness, social comparisons, information
JEL Classification: C91
Suggested Citation: Suggested Citation