There are many experimental studies of bargaining behavior, but suprisingly enough nearly no attempt has been made to investigate the so-called ultimatum bargaining behavior experimentally. The special property of ultimatum bargaining games is that on every stage of the bargaining process only one player has to decide and that before the last stage the set of outcomes is already restricted to only two results. To make the ultimatum aspect obvious we concentrated on situations with two players and two stages. In the ‘easy games’ a given amount c has to be distributed among the two players, whereas in the ‘complicated games’ the players have to allocate a bundle of black and white chips with different values for both players. We performed two main experiments for easy games as well as for complicated games. By a special experiment it was investigated how the demands of subjects as player 1 are related to their acceptance decisions as player 2.

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An experimental analysis of ultimatum bargaining

This paper proposes a new mechanism for combinatorial assignment—for example, assigning schedules of courses to students—based on an approximation to competitive equilibrium from equal incomes (CEEI) in which incomes are unequal but arbitrarily close together. The main technical result is an existence theorem for approximate CEEI. The mechanism is approximately efficient, satisfies two new criteria of outcome fairness, and is strategyproof in large markets. Its performance is explored on real data, and it is compared to alternatives from theory and practice: all other known mechanisms are either unfair ex post or manipulable even in large markets, and most are both manipulable and unfair.

The Combinatorial Assignment Problem: Approximate Competitive Equilibrium from Equal Incomes

We study the problem of fairly allocating a set of indivisible goods to a set of people from an algorithmic perspective. fair division has been a central topic in the economic literature and several concepts of fairness have been suggested. The criterion that we focus on is envy-freeness. In our model, a monotone utility function is associated with every player specifying the value of each subset of the goods for the player. An allocation is envy-free if every player prefers her own share than the share of any other player. When the goods are divisible, envy-free allocations always exist. In the presence of indivisibilities, we show that there exist allocations in which the envy is bounded by the maximum marginal utility, and present a simple algorithm for computing such allocations. We then look at the optimization problem of finding an allocation with minimum possible envy. In the general case the problem is not solvable or approximable in polynomial time unless P = NP. We consider natural special cases (e.g.additive utilities) which are closely related to a class of job scheduling problems. Approximation algorithms as well as inapproximability results are obtained. Finally we investigate the problem of designing truthful mechanisms for producing allocations with bounded envy.

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On approximately fair allocations of indivisible goods

The maximum Nash welfare (MNW) solution --- which selects an allocation that maximizes the product of utilities --- is known to provide outstanding fairness guarantees when allocating divisible goods. And while it seems to lose its luster when applied to indivisible goods, we show that, in fact, the MNW solution is unexpectedly, strikingly fair even in that setting. In particular, we prove that it selects allocations that are envy free up to one good --- a compelling notion that is quite elusive when coupled with economic efficiency. We also establish that the MNW solution provides a good approximation to another popular (yet possibly infeasible) fairness property, the maximin share guarantee, in theory and --- even more so --- in practice. While finding the MNW solution is computationally hard, we develop a nontrivial implementation, and demonstrate that it scales well on real data. These results lead us to believe that MNW is the ultimate solution for allocating indivisible goods, and underlie its deployment on a popular fair division website.

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The Unreasonable Fairness of Maximum Nash Welfare

Impossibility theorems suggest that the only efficient and strategyproof mechanisms for the problem of combinatorial assignment - e.g., assigning schedules of courses to students - are dictatorships. Dictatorships are mostly rejected as unfair: for any two agents, one chooses all their objects before the other chooses any. Any solution will involve compromise amongst efficiency, incentive and fairness considerations.This paper proposes a solution to the combinatorial assignment problem. It is developed in four steps. First, I propose two new criteria of outcome fairness, the maximin share guarantee and envy bounded by a single good, which weaken well-known criteria to accommodate indivisibilities; the criteria formalize why dictatorships are unfair. Second, I prove existence of an approximation to Competitive Equilibrium from Equal Incomes in which (i) incomes are unequal but arbitrarily close together; (ii) the market clears with error, which approaches zero in the limit and is small for realistic problems. Third, I show that this Approximate CEEI satisfies the fairness criteria. Last, I define a mechanism based on Approximate CEEI that is strategyproof for the zero-measure agents economists traditionally regard as price takers. The proposed mechanism is calibrated on real data and is compared to alternatives from theory and practice: all other known mechanisms are either manipulable by zero-measure agents or unfair ex-post, and most are both manipulable and unfair.

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H. Steihaus

Papers

The problem of fair division