Efficiency versus equality in bargaining

Galeotti, Fabio; Montero, Maria; Poulsen, Anders

Abstract

© The Author(s) 2019. 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-earning outcome if it is Pareto inefficient; a large proportion of bargaining pairs avoids 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. (JEL: C70, C72, C92)

Citation

Galeotti, F., Montero, M., & Poulsen, A. (2019). Efficiency versus equality in bargaining. Journal of European Economic Association, 17(6), 1941-1970. https://doi.org/10.1093/jeea/jvy030

• Journal Article Type: Article
• Acceptance Date: Mar 7, 2018
• Online Publication Date: Aug 31, 2018
• Publication Date: Dec 1, 2019
• Deposit Date: Mar 16, 2018
• Publicly Available Date: Aug 31, 2018
• Journal: Journal of the European Economic Association
• Print ISSN: 1542-4766
• Electronic ISSN: 1542-4774
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 17
• Issue: 6
• Pages: 1941-1970
• DOI: https://doi.org/10.1093/jeea/jvy030
• Keywords: bargaining, efficiency, equality, communication, experiment,independence of irrelevant alternatives
• Public URL: https://nottingham-repository.worktribe.com/output/937640
• Publisher URL: https://academic.oup.com/jeea/advance-article/doi/10.1093/jeea/jvy030/5088947
• Contract Date: Mar 16, 2018