Fairness motivation in bargaining

Abstract

In this paper, we develop a model that captures the potential conflict between two individuals who follow different fairness principles in bargaining. This model is used to analyse the infl uence of fairness motivation on the possibility of reaching an agreement in bargaining, and to examine the properties of the agreement. We show 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, we study the influence of fairness motivation on the bargaining outcome. A fairness motivated individual reaches an outcome that is closer to his fairness principle in bargaining against an individual who is only motivated by material self-interest.