Wage differentials and social comparison: An experimental study of interrelated ultimatum bargaining

Equal pay for equal work is discussed in many different legal and political contexts. Our study explores one consequence of this formula, the effect of social comparison for wage acceptance, in multilateral ultimatum games. The results of our laboratory experiments indicate that the availability of information concerning ultimatum offers to other responders influences acceptance behavior even if responders have differing outside options. Particularly, behavior is only partly influenced by self-regarding social comparison; that is, the probability of acceptance decreases significantly for offers that put responders at a substantial disadvantage compared with others. On the contrary, responders are also partly concerned about unfavorable discrimination against others. However, we find that in our setting, i.e. in a setting where the wage offer relation is endogenously chosen, a slightly unequal relation maximizes the joint acceptance frequency for both responders.