Bargaining over taking from a powerless third party: The role of social preferences

What is it about?

We experimentally examine how bargainers’ social preferences shape a powerless third party’s well-being when they can appropriate and redistribute its endowment. We explore two sources of social preferences: the feature of our taking game that enables bargainers to unilaterally enforce fairness without the fear of efficiency loss, and four non-monetary interventions aimed at increasing bargainers’ moral costs. We find that fewer than 10 percent of proposals are fair to the third party, yet around 40 percent of bargaining outcomes are fair — mainly because over 80 percent of those fair outcomes result from responders rejecting proposals unfair to the third party. This highlights the importance of unilateral enforcement in promoting fairness. In contrast, non-monetary interventions show minimal impact, suggesting a need for more effective design, possibly involving public visibility or stronger normative framing. Overall, the findings emphasize the role of institutions that enable individuals to ensure fairness for vulnerable parties without sacrificing efficiency.

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Why is it important?

We study how bargainers’ social preferences impact powerless third party’s welfare. Bargainers can take the third party’s endowment and negotiate its distribution. Most fair third-party outcomes stem from rejections of unfair proposals. In contrast, non-monetary interventions show minimal impact. We stress the role of unilateral ability to ensure fairness without efficiency loss.

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