The equity–efficiency trade-off in bargaining: Evidence from a modified Ultimatum Game

We report the results from a controlled laboratory experiment using a variant of the one-shot Ultimatum Game in which the pie available for sharing increases with the proposer’s own demand, creating an explicit equity-efficiency trade-off for both roles. Using data from 148 participants across three conditions – a baseline with a fixed pie, and one of two efficiency-loss conditions, in which a fairer distribution incurs either a moderate or severe reduction in the amount available – we investigate whether and how participants’ decisions, in the role of proposers and responders, are affected by the equity-efficiency trade-off. Our data confirm that participants in both roles tend to frequently aim at (almost) equal-split of the available amount, and that there is nonetheless a sizeable heterogeneity in demands. Overall, the evidence suggests that efficiency losses have limited effects on participants’ demands, although proposers tend to increase their demands under severe efficiency losses, while responders’ demands remain comparatively stable.