Rationality and Emotions in Ultimatum Bargaining

Shmuel Zamir

The Ultimatum Bargaining paradigm is often thought of as a demonstration of extreme disagreement between experimental evidence and game theoretical predictions and the basic assumption of rationality from which they are derived. Using the data of four experiments on Ultimatum Bargaining which I am involved in, I argue that, quite differently from this general impression, rationality in the sense of self-interested motives, is very much present in the observed behavior of both proposers and responders in the Ultimatum Bargaining game. Part of the argument calls for a broader interpretation of the notion of rationality than just immediate money maximization and the backward induction argument.

July, 2000
Published in: 
Annals d'Economie et de Statistique 61 (2001) 1-31