Strategic Implications of Reciprocity in Bargaining
Consider two separate bargaining scenarios, each involving a Proposer and a Responder who must agree on how to split $100. The fair norm is considered an equal split of $50. In Scenario A, the Responder's satisfaction from rejecting an unfair offer is equal to the amount by which the offer falls short of the $50 norm. In Scenario B, the Responder's satisfaction from rejection is four times the amount by which the offer falls short of the $50 norm.
Compare the minimum offers these two Responders would accept. Then, evaluate which scenario is more likely to result in a failed negotiation (where no agreement is reached). Justify your evaluation by explaining how a Proposer's potential lack of information about the Responder's motive could lead to a rejected offer in one scenario more than the other.
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Calculating a Minimum Offer in a Bargaining Scenario
In a two-person bargaining situation, a Proposer is to offer a split of $200 to a Responder. The Responder can accept the offer, in which case they both get the proposed amounts, or reject it, in which case they both get nothing. The Responder considers an equal split of $100 to be the fair norm. The Responder's satisfaction from rejecting an unfair offer is three times the amount by which the offer falls short of this $100 norm. What is the minimum dollar amount the Proposer must offer for the Responder to be willing to accept it?
In a bargaining game where the fair norm is a $50 offer, a Responder whose satisfaction from rejection is three times the amount an offer is below the norm will have a minimum acceptable offer that is exactly three times higher than a Responder whose satisfaction from rejection is equal to the amount an offer is below the norm.
Calculating a Responder's Minimum Acceptable Offer
In a bargaining game, a Proposer offers a Responder a share of $100. The fair norm is considered to be an equal split of $50. The Responder's satisfaction from rejecting an offer is determined by their reciprocity motive (R), multiplied by the amount the offer is below the $50 norm. Match each reciprocity motive (R) value with the correct minimum offer the Responder would be willing to accept.
In a bargaining game where two individuals must split $60, the fair norm is considered to be an equal split of $30. If a Responder's satisfaction from rejecting an offer is twice the amount by which the offer falls short of this norm, the minimum offer they would be willing to accept is $____.
In a bargaining scenario, a Proposer offers a share of a sum of money to a Responder. The Responder considers an equal split to be the fair norm. The Responder's satisfaction from rejecting an offer is directly proportional to how far the offer is below this norm, a relationship captured by a 'reciprocity motive' value (R). If this reciprocity motive (R) becomes extremely large, what does the minimum acceptable offer for the Responder approach?
Strategic Implications of Reciprocity in Bargaining
Inferring Preferences from Bargaining Behavior
In two separate but identical bargaining games, a total of $120 is to be split in each game. The fair norm is considered an equal split. Responder Alex's satisfaction from rejecting an unfair offer is twice the amount by which the offer falls short of the norm. Responder Ben's satisfaction from rejecting is four times the amount by which the offer falls short of the norm. If a Proposer in each game makes an identical offer of $45, what is the most likely outcome?
Calculating a Responder's Minimum Acceptable Offer