Scandinavian Working Papers in Economics

Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

No 04-16: Can Information Backfire? - Experimental Evidence from the Ultimatum Game

Anders U. Poulsen () and Jonathan H.W. Tan ()
Additional contact information
Anders U. Poulsen: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Jonathan H.W. Tan: Institute of Microeconomics, European University Viadrina, Postal: Institute of Microeconomics, European University Viadrina, Frankfurt (Oder), Germany

Abstract: We investigate experimentally if an option to obtain free information can disadvantage a player, relative to when information is unavailable. In the Ultimatum game, the Responder chooses a minimum acceptable offer and the Proposer decides at the same time whether to obtain and use information about the minimum acceptable offer. We find that the option of using free information on average reduces Proposers’, and increases Responders’, payoff, but by less than predicted. This is due to the presence of Proposers who either refuse information or who use it in a self-servingly fair manner. Information changes the distribution of the surplus, and increases inefficiency.

Keywords: Information; information acquisition; value of information; Ultimatum game; fairness; self-serving fairness

JEL-codes: C70; D63; D80

36 pages, December 10, 2004

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