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An Experimental Study on Dividing Gains through Politics
Author(s) -
Hsu LiChen,
Kan Kamhon,
Yang C.C.,
Yang ChunLei
Publication year - 2015
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/sjpe.12084
Subject(s) - monopolistic competition , monopoly , exploit , economics , politics , subgame perfect equilibrium , microeconomics , competition (biology) , neoclassical economics , law , political science , game theory , computer science , ecology , computer security , biology
This article offers experimental evidence to examine an important case in politics where a monopolistic proposer seeks a majority's consent from competitive responders to split the gain. The unique subgame perfect equilibrium prediction is that the side of trade with a monopoly will exploit the side of trade with competition to reap almost all of the gain. Our experimental evidence reveals that while responders do compete with each other to race to the bottom (consistent with the prediction), the monopolistic proposer settles down to offer a ‘fair’ share of the pie to those from whom he or she seeks majority support (contrary to the prediction).