Power Assignment in Experimental Games vs. Real Economies
While bargaining power is typically assigned by chance in economic experiments like the ultimatum game, its allocation in real-world economies is non-random. This difference is critical, as the method of assigning power has substantial effects on the final outcomes of strategic interactions and how resources are divided.
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Introduction to Microeconomics Course
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CORE Econ
Ch.5 The rules of the game: Who gets what and why - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Consider two distinct one-time bargaining situations involving a Proposer and a Responder who must agree on how to split $100.
Situation 1: The Proposer makes a take-it-or-leave-it offer. If the Responder accepts, they split the money as proposed. If the Responder rejects, both get nothing.
Situation 2: The Proposer dictates the split, and the Responder automatically receives their share with no ability to reject the offer.
How does the change in rules from Situation 1 to Situation 2 affect the relative bargaining power of the Proposer and the likely outcome?
Impact of Competition on Bargaining Outcomes
Consider three different one-time bargaining scenarios over a sum of $100. Arrange these scenarios in order from the one that gives the Proposer the MOST bargaining power to the one that gives the Proposer the LEAST bargaining power.
Analyzing the Impact of a Modified Rejection Payoff
Evaluating Rule Structures for Equitable Bargaining
In a strategic interaction where one person (the Proposer) offers to split a sum of money with another person (the Responder), match each modification to the rules with its most likely effect on the balance of bargaining power.
True or False: Consider a one-time bargaining situation where a Proposer offers a split of $100 to a Responder. If the rule is changed from 'a rejection means both players get $0' to 'a rejection means the Responder gets $10 and the Proposer gets $0', this change in rules decreases the Responder's bargaining power.
In a one-time bargaining interaction, a Proposer offers to split $100 with a single Responder. If the Responder rejects the offer, both individuals receive nothing. If the rules are changed so that the Proposer makes an offer to two Responders simultaneously, and the split is finalized with the first Responder to accept, the introduction of this competition is expected to cause the average offer amount accepted by a Responder to ________.
Analyzing the Impact of an Outside Option on Bargaining Power
A research institute is studying how different rule structures affect negotiation outcomes. They set up four different scenarios for a Proposer to split a $100 prize with a Responder. In which of the following scenarios does the Proposer have the most structural power, making a highly unequal split (e.g., the Proposer keeping almost everything) the most probable outcome?
How Game Rules Shape Bargaining Power in the Ultimatum Game
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Learn After
Sources of Bargaining Power
Evaluating the External Validity of Economic Experiments
In a laboratory experiment where two anonymous participants play a one-time game to divide a sum of money, the role of 'proposer' is assigned by a coin flip. Proposers in this setting typically offer the 'responder' a substantial share (e.g., 40-50%). In contrast, many real-world negotiations over economic surplus, such as between a large established firm and a new, small supplier, often result in a much less equal division. Which of the following statements best analyzes the primary reason for this difference in outcomes?
Real-World vs. Experimental Bargaining Power
The results of economic experiments where bargaining roles are assigned by chance (e.g., a coin flip) are highly reliable for directly predicting the specific division of resources in most real-world negotiations, such as those between a landlord and a tenant.
An economist observes that in a laboratory game where the role of 'proposer' is assigned by a coin flip, proposers offer, on average, 40% of the total sum to 'responders'. Based solely on this finding, the economist concludes that in a real-world negotiation between a single powerful employer and a potential employee with few other job options, the employer will likely offer the worker about 40% of the value they jointly create. Which statement best identifies the primary flaw in this conclusion?
Match each concept to the description that best explains its role in determining bargaining power in either an experimental or a real-world context.
Evaluating Claims Based on Experimental Evidence
Critiquing Policy Based on Experimental Evidence
Critiquing an Experimental Design for Policy Recommendations