From Ultimatum Bargaining to Dictatorship—an Experimental Study of Four Games Varying in Veto Power

Inspired by Bolton and Zwick (1995) we study four different games, namely the ultimatum and dictator game as well as the two games in which a veto (non‐acceptance) of the responder implies that only one of the two players does not receive the proposed payoff. In the experiment the participants had to play either as the proposer or as the responder in all four games. Only the proposer was privately informed about the actual cake size which could be either small or large. The main results were that the offers were more generous when the responder could only veto the proposer's payoff than in ultimatum bargaining which, in turn, induced more generous offers than dictatorship. The worst proposals were observed when the responder could only reject his own payoff. A similar tendency was also observed for the minimal offers required for acceptance although many acceptance strategies were non‐monotonic. Allocators with large cakes did not hide behind the small cake by offering an equal share of the small cake. A pre‐experimental questionnaire designed to trigger considerations of backward induction led to more generosity.