Does competition affect social preferences in the context of a Essay

Does competition affect social preferences in the context of a bargaining game Discuss - Essay Example Economics approach on these social preferences assumes that people are rationale and prioritize their personal interests before those of the other people. On the other hand, bargaining games are defined as a situation whereby at least two or more players are required to get into a consensus concerning how to share a given amount of goods, money, opportunities, or any other resource that might be of common interest (Wilkinson and Klaes,   2008, p22). In bargaining games, both parties try their level best to get the most favorable deal by getting into a fair agreement with the other party. Bargaining in labor unions, directors’ negotiation for wage increase as well as dispute between two communities or parties over distribution of a certain resources, territories among other elements are good examples of bargaining games (Wilkinson and Klaes,   2008, p23). To explain how competition affects social preferences, the writer will first focus on the Ultimate Game model. Ultimatum Game (UG) refers to a popular test that is used to analyze specific bargaining behaviors. It is a test of self-interested model that involves two players interacting to decide how to share a given amount of money. The game is commonly applied in economic experiments and the condition behind the game is that the two players must not be familiar with each other and that the game must be played only once between these two particular players. In this case, one of the players becomes the proposer while the other one becomes the responder. Both the required to share a given amount of money with the proposer being the main determinant of the mode of division to be used. The responder is given an option of either accepting the proposer’s offer or declining it, in case the offer is accepted, both get the amount shared according to how the proposer had made the offer, if the respondent declines it, both parties walk away with nothing