On the role of the hostage in ultimatum bargaining games

This paper examines behavior in a three-player ultimatum game. The payoff to the non-decision-making player (the “hostage”) is separate from the bargaining pie and varies. We find that while responders may behave altruistically towards the hostage, they are more likely to reject a given offer if it leaves them with a more inequitable payoff relative to the hostage. Offers appear to be unaffected by the presence of a hostage. Though not a direct test of the Fehr and Schmidt [Fehr, E., Schmidt, K.M., 1999. A theory of fairness, competition, and cooperation. Quarterly Journal of Economics 114 (3), 817–868] and Bolton and Ockenfels [Bolton, G., Ockenfels, A., 2000. ERC: a theory of equity, reciprocity, and competition. American Economic Review 90, 166–193] models, our results are qualitatively consistent with their predictions.