Efficiency versus Equality in Bargaining

Fabio Galeotti, Maria Montero, Anders Poulsen

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
17 Downloads (Pure)

Abstract

We consider how the outcome of bargaining varies with changes in the trade-off between equality, efficiency, and total-earnings maximization. We observe that subjects avoid an equal-earnings outcome if it is Pareto inefficient; a large proportion of bargaining pairs avoid an equal and Pareto efficient outcome in favor of one giving unequal and total-earnings maximizing payoffs, and this proportion increases when unequal outcomes imply larger earnings to one of the players, even though this also implies higher inequality; finally, we document a compromise effect that violates the independence of irrelevant alternatives condition.
Original languageEnglish
Pages (from-to)1941–1970
Number of pages30
JournalJournal of the European Economic Association
Volume17
Issue number6
Early online date31 Aug 2018
DOIs
Publication statusPublished - Dec 2019

Keywords

  • bargaining
  • efficiency
  • equality
  • communication
  • experiment
  • independence of irrelevant alternatives

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