When proposers demand less without need
Ultimatum bargaining in the loss domain
Subjects in the loss domain tend to split payoffs equally when bargaining. The ultimatum game offers an ideal mechanism through which economists can investigate whether equal splits are the consequence of proposer generosity or due to their anticipation that the responders will reject lower offers. This paper experimentally compares ultimatum bargaining in a loss domain with that under gains. The results reveal that, although responders do not expect more in the loss domain, proposers do make higher offers. As such, proposers reach agreements more often in the loss domain than they do in the gains domain, and responders receive higher payoffs.