Reciprocity, Inefficiency and Social Exclusion : Experimental Evidence

This paper investigates experimentally the impact of reciprocal fairness considerations in multilateral bargaining and coalition formation. The consequences for effciency and the distribution of wealth are analyzed. The results show that reciprocal fairness indeed deeply affects the effciency and equity of coalition formation. In up to 91 percent of the cases an ineffcient and unfair coalition is chosen. Up to almost one third of the population is excluded from bargaining and earns nothing. Effciency losses between 5 and 20 percent occur. The results can be explained by the interplay of selfish behaviour of 'proposers' and negative reciprocal behaviour of 'responders'