Ecologies of Preferences with Envy as an Antidote to Risk-Aversion in Bargaining
by
Yaacov Bergman
Hebrew University
Coauthors: Nittai Bergman (Harvard University)

Models have been put forward recently that seem to be successful in explaining apparently anomalous experimental results in the Ultimatum Game. While imparting fixed preference orders to agents, they depart from traditional models by assuming preference orders that take account not only of the material payoff to oneself, but also of that which is given to others.

However, they leave open the question of how is an agentÕs economic survival helped by a preference order that advises him to leave money on the table.

Our answer is that, indeed, doing so does not help. But that the same envious preference order that ill advises in some circumstances to reject an ÒinsultinglyÓ small offer, advises well in other circumstances, when it helps the same agent to overcome his risk-aversion and to offer a risky, tough offer that yields him a higher expected dollar gain.

In some plausible population distributions, the two effects exactly balance out across different preference types, which then results in asymptotically stable, stationary, inefficient, population distributions in which the different preferences are represented, and where, as commonly observed in an Ultimatum Game, positive offers are made, of which some are rejected with positive probability.

* * * * * * * * * * * * * * * * * * * * * * * * * To get a copy of the paper, email your request to: msyberg@mscc.huji.ac.il

Date received: June 9, 2000

Copyright © 2000 by the author(s). The author(s) of this document and the organizers of the conference have granted their consent to include this abstract in Atlas Conferences Inc. Document # cafi-37.