Fairness vs. Simplicity in Appointment Rules

  • Authors: Matias Nunez, Danilo Coelho, Carlos Alós-Ferrera and Salvador Barberà.
  • BSE Working Paper: 1490 | May 25
  • Keywords: bargaining , fairness , backward induction , Appointment rules
  • JEL codes: C78, C92, D63, D74, D82
  • bargaining
  • fairness
  • backward induction
  • Appointment rules
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Abstract

Arbitrators for high-stakes conflicts, as well as judges and other officials, are of- ten appointed through structured bargaining protocols. The theoretical literature models these protocols as extensive-form games with perfect information, evaluating them based on the merits of their subgame-perfect equilibria, such as efficiency. However, decision makers often fail to implement backward induction and exhibit other-regarding preferences. In a large experiment, we compare two prominent protocols and show that those concerns affect outcomes. Bargaining protocols whose equilibria are unfair (in a maximin sense) fare poorly compared to those favoring compromises. However, lengthy protocols face limitations because they elicit non-equilibrium behavior.

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