Fair Territory: Preferences, Bargaining, and the Endowment Effect

97-14

Posted: 6 Apr 1998

See all articles by H. Lorne Carmichael

H. Lorne Carmichael

Queen's University

W. Bentley MacLeod

Columbia University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

We examine an evolutionary model of bargaining behavior in a society where resources are finite. Agents who develop better strategies for bargaining and trading come to dominate the population. We show that successful agents exhibit loss aversion and an "endowment effect." When information is symmetric, a norm of equity is evolutionarily stable and efficient. In this case, disagreement arises when there is uncertainty concerning the gains to trade. The social institution of private property may emerge spontaneously when information concerning individual endowments is private. As in the symmetric information case, disagreement (or inefficiencies) arise when there is uncertainty over the gains from trade.

JEL Classification: C78, D83

Suggested Citation

Carmichael, H. Lorne and MacLeod, William Bentley, Fair Territory: Preferences, Bargaining, and the Endowment Effect. 97-14. Available at SSRN: https://ssrn.com/abstract=74069

H. Lorne Carmichael

Queen's University ( email )

Kingston, Ontario K7L 3N6 K7L 3N6
Canada
615-533-2253 (Phone)
615-533-6668 (Fax)

William Bentley MacLeod (Contact Author)

Columbia University - Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

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Germany

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