Demands and Offers in Ultimatum Games
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University of Mississippi eGrove Electronic Theses and Dissertations Graduate School 2018 Demands And Offers In Ultimatum Games Jeremiah Wills University of Mississippi Follow this and additional works at: https://egrove.olemiss.edu/etd Part of the Economics Commons Recommended Citation Wills, Jeremiah, "Demands And Offers In Ultimatum Games" (2018). Electronic Theses and Dissertations. 957. https://egrove.olemiss.edu/etd/957 This Dissertation is brought to you for free and open access by the Graduate School at eGrove. It has been accepted for inclusion in Electronic Theses and Dissertations by an authorized administrator of eGrove. For more information, please contact [email protected]. DEMANDS AND OFFERS IN ULTIMATUM GAMES. A Dissertation presented for the Doctor of Philosophy Degree The University of Mississippi by Jeremiah Wills May 2018 Copyright © 2018 by Jeremiah Wills All rights reserved ABSTRACT Pecorino and Van Boening (2010) introduce the Embedded Ultimatum game. The authors embed an ultimatum game into a stylized legal bargaining framework and cross analyze the offer and dispute behavior in this game with the same behavior in a baseline simple ultimatum game. The current study seeks to test the replicability of a computerized version of these games. Additionally, variations of the two games are introduced here to test the effects of specific manipulation of the framing of the simple ultimatum game, as well as to test the effects of specific manipulation of the offer structure in both the simple and embedded ultimatum games. Overall it is found that the computerized embedded game replicates the hand-run game from Pecorino and Van Boening (2010). Similar to the previous study, mean and median offers of surplus in the embedded game are significantly lower than they are in the simple game. Furthermore, small changes in the framing and offer structure result in significant changes in observed offer and dispute behavior. DEDICATION To my parents for their constant and unwavering support during the writing of this dissertation, and in life in general. To Professor John Pomery for his amazing work ethic as a teacher and changing the way I view economics and the world around me. iii ACKNOWLEDGMENTS This study is funded by the Mississippi Economics Research Lab at the University of Mississippi. I am forever indebted to my committee chair, Professor Mark Van Boening, for his continued support and guidance during the writing of this dissertation and over the years. I would also like to thank the remaining members of my committee: John Gardner, Tom Garrett, and Jack Williams, for time, patience, guidance, and acceptance of being on my committee. Additionally, I would like to thank Professor John Conlon for his tough love as a teacher and for our conversations in and outside the classroom. iv TABLE OF CONTENTS ABSTRACT ................................................................................................................................... ii DEDICATION.............................................................................................................................. iii ACKNOWLEDGMENTS ........................................................................................................... iv CH. 1 RESEARCH OBJECTIVE ............................................................................................... 1 1.1 Introduction ......................................................................................................................... 1 1.2 Research Objectives ............................................................................................................ 9 CH. 2 LITERATURE REVIEW ............................................................................................... 13 2.1 Ultimatum Game ............................................................................................................... 13 2.2 Legal Bargaining ............................................................................................................... 20 2.3 Theory ................................................................................................................................ 21 CH. 3 DESIGN ............................................................................................................................ 24 3.1 Design Overview................................................................................................................ 24 3.2 The Demand and Offer Games. ....................................................................................... 26 3.3 The Embedded Demand and Embedded Offer games .................................................. 28 3.4 Attitudes Toward Risk and Other-Regarding Preferences .......................................... 31 3.4 Predictions ......................................................................................................................... 37 CH. 4 DATA AND RESULTS ................................................................................................... 39 4.1 Data Overview ................................................................................................................... 39 4.2 The Demand and Offer Games ........................................................................................ 41 4.3 The Embedded Demand and Offer Games .................................................................... 46 4.4 Simple and Embedded Ultimatum Games. .................................................................... 54 4.5 Settlement Levels (High vs. Low) .................................................................................... 60 4.6 Measured attitudes toward risk and other-regarding behavior ................................... 68 Ch. 5 DISUSSION ....................................................................................................................... 75 BIBLIOGRAPHY ..............................................................................................................81 APPENDIX ........................................................................................................................86 VITA ................................................................................................................................111 v LIST OF TABLES Table 1. Primary Research Hypotheses ........................................................................................ 10 Table 2. Experimental Design...................................................................................................... 25 Table 3. The Simple Demand and Offer Games .......................................................................... 26 Table 4. The Embedded Demand and Embedded Offer Games .................................................. 29 Table 5. Binary Lotter Choices for Part 1 in the Embedded Game Sessions .............................. 34 Table 6. Rational Risk-Neutral Predictions ................................................................................. 37 Table 7. Equal - Split Predictions ................................................................................................ 38 Table 8. Research Questions and Tested Effects ......................................................................... 40 Table 9. Variables Used in Random Effects Regression Models ................................................ 41 Table 10. Summary Statistics for Surplus Offers in the Simple Games ...................................... 44 Table 11. Test of Differences in Surplus Offers in the Simple Games ........................................ 45 Table 12. Summary Statistics for Surplus Offers in the Embedded Games ................................ 50 Table 13. Test of differences in Surplus Offers in the Embedded Games ................................... 51 Table 14. Summary Statistics for Surplus Offers in all Four Ultimatum Games ........................ 56 Table 15. Test for Differences in Surplus Offers in the Demand and Embedded Demand Games ............................................................................................................................................... 57 Table 16. Test for Differences in Surplus Offers in the Offer and Embedded Offer Games ...... 58 Table 17. Summary Statistics of Surplus Offers in the Embedded Games by A-Type ............... 62 Table 18. Test for Differences in Surplus Offers by A-Types in the Embedded Demand Game 63 Table 19. Summary Statistics for Surplus Offers in the Embedded Offer Game by A type ....... 65 Table 20. Test for Differences in Surplus Offers to A-Types in the Embedded Offer Game ..... 66 Table 21. Summary Statistics for Surplus Offers in Parts 2 and 3 of the Embedded Game Sessions ................................................................................................................................. 70 Table 22. Explaining Offers in the Embedded Games ................................................................ 73 Table 25. Explaining Dispute Rates in the Embedded Games .................................................... 74 vi LIST OF FIGURES Figure 1. Surplus Offers in the Simple Games ............................................................................ 43 Figure 2. Dispute Rates in the Simple Games ............................................................................. 46 Figure 3. Surplus Offers in the Embedded Games (All Offers) .................................................. 48 Figure 4. Surplus Offers in the Embedded Games (Offers 0 to 150)