3 - Equity and coalition bargaining in experimental three-person games

Summary

Introduction

Games in characteristic function form were introduced by von Neumann and Morgenstern (1944). Laboratory experiments on such games have led to descriptive theories of coalition bargaining. No theory proposed up to now is completely satisfactory in light of the data. However, the evidence clearly suggests that equity considerations have a strong influence on observed payoff divisions. The purpose of this chapter is to elucidate this phenomenon.

The formal structure of equity considerations can be expressed by an “equity principle,” which is explained in Section 3.2. This principle is well known in the social psychology literature (Homans, 1961; Adams, 1963; Leventhal and Michaels, 1969; Walster, Walster, and Berscheid, 1978; Harris, 1976; Mikula, 1980). The terminology used here is based on a paper published elsewhere (Selten, 1978).

To some extent the influence of equity considerations on the behavior of subjects in coalition experiments may be due to the subjects' desire to conform to social norms. However, a different explanation of the phenomenon seems to be more adequate for most of the experimental results.

In a unanimity game where the players can either all agree on the division of a fixed sum of money or else end up with zero payoffs for everyone, the inherent symmetry of the situation points to equal shares for all players.