Critiquing Fairness with Bargaining Game Evidence
A common assertion is that humans have an innate sense of fairness that guides their economic decisions. Critique this assertion using evidence from bargaining games. Specifically, contrast the typical behavior of a person who is the sole recipient of a take-it-or-leave-it offer with the behavior of a person who is one of two individuals competing to accept the same offer. Explain what the observed behavioral shift between these two scenarios reveals about the relative strengths of fairness concerns versus self-interest when competition is introduced.
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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