TITLE:
Fairness in an Ultimatum Game
AUTHORS:
Mohamed I. Gomaa, Stuart Mestelman, S. M. Khalid Nainar, Mohamed Shehata
KEYWORDS:
Fairness, Social Value Orientation, Risk Attitudes, Ultimatum Game, Endogeneity
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
April
13,
2016
ABSTRACT: We present a controlled
laboratory environment in which we use an ultimatum game to generate two
endogenous fairness indices. We use these as alternatives to the more
conventional exogenous measure, the offer index, in a model of offer-acceptance
which includes measures of social value orientations and risk attitudes as
variables for explaining the acceptance or rejections of offers in an ultimatum
game. In particular we are interested in providing an explanatory model which
can support situations in which the likelihood to accept unfair offers (as
measured by the offer index) will exceed the likelihood of rejecting a fair
offer (again, as measured by the offer index). The offer index in the ultimatum
game setting is the amount offered by a sender divided by the total endowment
of the sender. Our endogenous fairness indices meet our condition of the
likelihood of acceptance of an unfair offer exceeding the likelihood of
rejecting a fair offer even though the explanatory power of the
offer-acceptance models with the endogenous fairness indices is not significantly
different from that with the exogenous fairness index.