Social Comparisons in Ultimatum Bargaining

Abstract

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