The threat premium in economic bargaining

Costly punishment is thought to have evolved because it promotes cooperation and the equitable sharing of resources, but the costs associated with punishment - for both the punisher and the punished - limit the efficiency of this enforcement system in economic interactions. Reputation may also guide decision-making, but this information is not always available (e.g., in interactions involving strangers). Across several bargaining studies, we provide evidence of an efficient and flexible “threat-based” bargaining system that can influence the division of resources without the need for costly punishment and reputational information. We found that participants, without prompting, dynamically adjusted bargaining based on the perceived threat-potential (resource holding power and aggressiveness) of the bargaining partner, giving larger offers to individuals who appeared more threatening. These effects of perceived threat-potential were strongest among participants who were most vulnerable to harm in physical contests (women vs men and weaker men vs stronger men), despite that offers were made on-line and anonymously to photographs of the individuals rather than in face-to-face interactions. These results may reflect an overgeneralization of a real-world threat heuristic that allows low threat individuals to extract resources when possible, while avoiding physical retaliation and harm, and high threat individuals to appropriate larger shares of a resource through static facial cues of threat rather than by physically expressing their propensity to punish. Previously, researchers have highlighted the monetary advantages of attractiveness (the “beauty premium”), but the effects of threat either trumped, devalued, or were equivalent to those of attractiveness.