Document Type

Honors Paper

Advisor

David Chavanne

Publication Date

2015

Abstract

Many papers have used the ultimatum game as a means to test bargaining behavior. A subset of experiments has examined the use of cheap talk and asymmetric in bargaining scenarios. Yet, this earlier work leaves out many of the complicated factors that occur in bargaining in the real world. No research has looked at the interaction of probabilities and threats in ultimatum games. The experiment described here makes two novel modifications to the ultimatum game: First: participant’s have the ability to send threats. Second: the game uses probabilities to determine whether or not the endowment size becomes revealed. The data show that both threats and probabilities affect the outcomes of the game in interesting ways. Threats affect the amount offered by proposers but do not have a large influence on lying whereas a higher probability of being revealed decreases lying. The implications from this research helps shed light on why we have many institutions dedicated to eliminating uncertainty from a multitude of transactions.

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The views expressed in this paper are solely those of the author.