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

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.