Information, strategic behavior, and fairness in ultimatum bargaining: An experimental study

This paper reports on an experimental study of ultimatum bargaining situations in which an inactive third player is present. The proposer X suggests an allocation (x, y, z) on how to divide a cake between X, Y, and Z. A message m that (partially) reveals this proposal is sent to the responder Y who has to accept or reject it. If Y accepts, each player gets paid as proposed, otherwise each player receives zero. In our experiments the three messages m = (x, y, z), m = y, and m = z were used. The information condition is common knowledge. The proposer's offer is seen to depend on the information condition. Specifically, the lower the information content of the message, the greedier the demand x of the proposer. In the case where m = z, the modal proposal allocates (almost) all of the cake to X. In the other cases, the responder receives slightly more than 1/3 of the cake on average. (C) 1998 Academic Press.