Wulf Gaertner (Osnabrück) & Lars Schwettmann (Wittenberg): “Bargaining over Losses”

Abstract: We conduct a lab-experimental study of bargaining over the distribution of monetary losses. Groups of four participants who are differently endowed in terms of real money must agree, as a group, on the contribution each participant will make to cover a financial loss imposed on this group. The study sheds light on burden sharing and what loss allocation rules groups adopt. The rule to share the loss in proportion to the initial endowment which was found in experiments dealing with bequest or bankruptcy receives only little support in our experiments. The constrained equal awards rule and a rule that we conceived, a rule that focuses on an equal share of the total loss and a weighted difference between the own initial endowment of a player and the average endowment over all players, get much more support. We introduced several variations of our basic game. One variant which stages a knowledge quiz at the beginning of the experiment, shows in comparison with the base game (a) that the most successful player tends to offer less and (b) that the other players seem to honour this player’s success.