PhD defense: Negotiations and fairness

On Monday 20 June 2011 Sigbjørn Birkeland will hold a trial lecture on a prescribed topic, and defend his thesis for the PhD degree at NHH.

16.06.2011 - Ed.

Prescribed topic for the trial lecture:
Social preferences in the lab and in the field - Evidence and practical implications

Time of the trial lecture:
10:15 in Karl Borch's Auditorium, NHH

Title of the thesis:
Essays on behavioural game theory

Time and place for the defense:
12:15 in Karl Borch's Auditorium, NHH

Members of the evaluation committee:
Professor Kjetil Bjorvatn, NHH (chairperson)
Professor Gaute Torsvik, University of Bergen
Professor Matthias Sutter, University of Innsbruck

Supervising committee:
Professor Bertil Tungodden, NHH (principal supervisor)
Professor James Konow, Loyola Marymount University

Abstract:
The thesis consists of three essays. The first two essays study bargaining behaviour, and the third essay studies the social preferences of criminals.

In the first essay, the effect of possible third party settlement on negotiation behaviour is studied in an economic bargaining experiment. The bargaining phase is preceded by a production phase that allows for different fairness principles to guide the division of the total production value. The experimental results show that a possible third party settlement lowers the dispute costs by reducing the number of rounds of alternating offers. In the presence of a third party, negotiators make first offers that are more strongly related to their production, which reduces the number of rounds of bargaining. The production phase has an effect on the distributional property of the settlements. In negotiations where third party settlement is an option, the negotiation outcome shifts towards a more unequal outcome, more in line with each person's contribution.

In the second essay, a model is developed that captures the potential conflict between two individuals who follow different fairness principles in bargaining. This model is used to analyse the influence of fairness motivation on the possibility of reaching an agreement in bargaining, and to examine the properties of the agreement. It is shown that bargaining between two individuals who are strongly fairness motivated, but who disagree about what represents a fair division, ends in disagreement. This result contrasts the standard bargaining model with individuals who are only motivated by material self-interest, which always leads to agreement. Furthermore, by applying the Nash bargaining solution, the influence of fairness motivation on the bargaining outcome is studied. A fairness motivated individual reaches an outcome that is closer to his/her fairness principle in bargaining against an individual who is only motivated by material self-interest.

The third essay studies the social preferences of criminals. It is, to our knowledge, the first to do so by conducting an economic lab experiment on a group of prisoners. The main finding in our study is that the prisoners are not immoral in the sense that they are generally unwilling to act on pro-social preferences. Comparing the behaviour of the prisoners with the behaviour of a benchmark group recruited from a representative sample of the Norwegian population, we find a striking similarity in the importance the two groups attach to pro-social preferences both in strategic and non-strategic situations. We furthermore find little evidence of in-group favouritism in situations where the two groups interact. The pro-social behaviour of the prisoners in our experiment clearly contrasts with their anti-social behaviour outside the lab. One possible explanation for this cross-situational inconsistency is that behaviour in the lab is motivated by different social preferences than behaviour outside the lab. The situational inconsistency in behaviour could, however, also be seen as suggesting that social preferences are of little importance, compared to circumstances, in explaining criminal behaviour.