Comparing Responder Behavior in Bargaining Scenarios
Consider two distinct situations involving a proposal to split $100:
Situation 1: Person A offers a split of the $100 to Person B. If Person B accepts the proposal, they split the money as offered. If Person B rejects it, neither person receives any money.
Situation 2: Person A makes a single offer to split the $100, presented simultaneously to both Person B and Person C. The first person to accept the offer gets the proposed share, and the interaction ends for everyone. If both reject the offer, no one receives any money.
Compare Person B's likely decision-making process in Situation 1 versus Situation 2 when faced with a low offer (e.g., keeping $90 for Person A, offering $10 to the other party). Explain why the dynamics in Situation 2 would likely cause Person B's behavior to more closely resemble that of a purely self-interested individual focused only on maximizing their own monetary outcome.
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Mechanism: Competition Weakens a Responder's Power of Refusal
Responder Competition Increases Proposer's Bargaining Power
Behavioral Shift in a Competitive Bargaining Scenario
In a standard bargaining scenario, a 'Proposer' offers a 'Responder' a portion of a sum of money, say $10. If the Responder accepts, they split the money as proposed. If the Responder rejects, both get nothing. Now, consider a modified scenario where the Proposer makes the same offer to two Responders at the same time. The first Responder to accept the deal gets the offered portion, and the game ends. If both reject, everyone gets nothing. How does the introduction of a second, competing Responder most likely change the behavior of an individual Responder when faced with a low offer (e.g., $1 out of the $10)?
The Influence of Competition on Bargaining Behavior
In a bargaining scenario where two individuals must compete to accept a single offer from a third party, an individual's increased willingness to accept a low offer stems from a greater sense of fairness and empathy towards the offer-maker.
Comparing Responder Behavior in Bargaining Scenarios
Match each bargaining scenario with the most likely primary motivation influencing the 'Responder's' decision-making process.
In a bargaining situation where a single offer is made to two competing individuals, a person is more likely to accept a low offer primarily because the presence of a competitor significantly ________ their ability to effectively punish the offer-maker for an unfair proposal.
A 'Proposer' offers to give one dollar from a total of ten dollars to another person, the 'Responder'. The Responder's decision determines the outcome. Consider three variations of this scenario. Arrange them in order, from the one where the Responder is least likely to accept the one-dollar offer to the one where they are most likely to accept it.
An economist runs two experiments. In Experiment 1, a 'Proposer' offers a split of $20 to a single 'Responder'. In Experiment 2, a Proposer makes the same offer to two Responders simultaneously, and the first to accept wins the money. The economist observes that Responders in Experiment 2 accept significantly lower offers than Responders in Experiment 1. A student reviewing the results concludes: 'This proves that the people randomly assigned to Experiment 2 were simply more focused on personal profit and less concerned about fairness than the people in Experiment 1.' Which statement below provides the most accurate critique of the student's conclusion?
Critiquing Fairness with Bargaining Game Evidence