Evaluating Rule Structures for Equitable Bargaining
Imagine you are designing a system for two parties to divide a valuable, one-time resource. Your goal is to create a set of rules that promotes an equitable outcome.
Consider the following three potential rule structures:
- Rule Set A: One party (the Proposer) suggests a division. The other party (the Responder) can either accept the division or reject it. If the offer is rejected, neither party receives anything.
- Rule Set B: One party (the Proposer) suggests a division. There are two Responders. If at least one Responder accepts the offer, the deal is made with that Responder, and the other Responder gets nothing. If both reject, no one gets anything. If both accept, one is chosen at random to receive their share.
- Rule Set C: One party (the Proposer) simply dictates the division, and the other party (the Responder) has no power to reject it and must accept the share they are given.
Evaluate these three rule sets. In your evaluation, analyze how each set of rules influences the bargaining power of the Proposer and the likely distribution of the resource. Conclude by arguing which rule set you believe is most likely to lead to an equitable outcome and justify your reasoning.
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Introduction to Microeconomics Course
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Situation 2: The Proposer dictates the split, and the Responder automatically receives their share with no ability to reject the offer.
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