Fairness in Bargaining and Markets

This book focuses on economic bargaining theory. Economic bargaining theory explores the relationship between bargaining situ ations and the outcomes of the bargaining. Predictions for bargaining outcomes are developed by modeling the bargaining situation as a strategic game and using game theoretic equilibrium concepts in order to solve the game.

This book contributes to behavioral economic research on the central issue of social preferences, focusing on the implications of social fairness norms on the interaction of market participants. The author uses both game-theoretic and experimental methods to analyze the implications of social fairness norms on the outcomes of bilateral bargaining situations. It is shown that a preference for reciprocity is evolutionarily stable in a "game of life" that consists of bilateral bargaining situations. The fairness benchmark or reference that such a preference depends on is investigated through a classroom experiment. Furthermore, the book presents a theoretical analysis of a market model as well as an experimental laboratory study to explore the implications of fairness concerns for price formation in matching markets.