TOWARD THE SETTLEMENT OF THE FAIRNESS ISSUES IN ULTIMATUM GAMES - A BARGAINING APPROACH

It has been suggested that modest demands by first movers in ultimatum games are motivated by fairness. Here we present a bargaining framework in which the main characteristic of the ultimatum game is embedded in an infinite horizon fixed-cost bargaining game where a quit move is a legitimate response. We show that the threat of quitting which in theory is empty, has nonetheless a significant attenuating effect on the demands of strong players. The fairness argument is therefore invalid since no moderation of demands is seen when the quit move is forbidden.