On the Nature of Fairness in Bargaining - Experimental Evidence from Germany and PR China

This paper presents a new perspective on the nature of fairness in bargaining by using verbal data from spontaneous team discussions and written statements on decision motives. Systematic content analysis proves a valuable source for providing new insights. The nature of fairness can be viewed as consisting of different facets or components. The ones we study are allocation aspects, power asymmetry, cultural background, the interplay between fairness and mentalizing, frequency of interactions and procedure of assigning positions. In one-shot UG experiments with randomly assigned positions, subjects who make fairness an issue- i.e. about 50% - view the Equal Split as the predominant fairness norm in both subject pools in the symmetric and in the asymmetric settings. Equal-Split related fairness discussions increase pro-posers' offers. Fairness concerns per se do not have such an effect. The Equal Split predominance vanishes in asymmetric bargaining situations where subjects interact repeatedly and work for their position. Here, the equitable but unequal allocations Split the Difference and Proportional Split are considered fair as well by more and less powerful players. The transcripts show that subjects mentalize when discussing fairness. They reason up to the second level in both the mechanisms we discovered in the verbal protocols. We found cultural differences in fairness perceptions in that fairness is not irrelevant for the Chinese but seems more important for the German participants. The lesson we draw from our findings is that power asymmetry, cultural back-ground and situational properties matter for fairness perceptions and should be accounted for when applying social preference models.